The “infinite money glitch” associated with corporate Bitcoin treasuries has come to a halt.
Throughout much of this market cycle, the strategy was straightforward: shares in companies holding Bitcoin traded at a significant premium compared to their underlying Net Asset Value (NAV).
This enabled firms to issue costly equity to acquire Bitcoin at lower prices, effectively boosting Bitcoin per share. It was a financial engineering flywheel that depended on one key factor: a sustained equity premium.
Reasons for the Disappearance of Bitcoin Treasury Company Premiums
Unfortunately, that vital factor has diminished as a result of Bitcoin’s recent price issues.
Data from Glassnode indicates that BTC’s price has fallen below the 0.75 quantile since mid-November, leaving over a quarter of its circulating supply at an unrealized loss.
In light of this, firms within the Bitcoin Digital Asset Treasury (DAT) sector—valued at approximately $68.3 billion—have seen declines of 27% over the past month and nearly 41% over the last three months, according to Artemis data.
In comparison, Bitcoin itself has dropped around 13% and 16% in those same timeframes.
The “high beta” characteristic of these stocks has indeed held, but only in the negative direction. Consequently, the financial mechanism has become ineffective.
The premium to NAV that once backed aggressive issuance strategies from companies such as MicroStrategy (now simply “Strategy”) and Metaplanet has mostly disappeared.
Simultaneously, a significant portion of the sector is now trading at or below 1.0x “mNAV” (market value adjusted for debt).
When this premium turns into a discount, issuing shares to acquire Bitcoin transforms from a value-adding strategy to one that destroys value.
Therefore, for this sector to transition from a group of distressed proxies back into a premium asset class, the market needs more than just a minor price rebound. A fundamental overhaul across price, liquidity, and governance is essential.
Addressing the Underwater Cost Basis
The first obstacle is purely numerical. A quick rebound in Bitcoin’s price is not enough to reignite the issuance engines, as the cost base for latecomers in the sector remains alarmingly high.
The data from Artemis reveals a division in the market. While earlier adopters bask in profits, the more recent treasury companies are struggling.
Galaxy Research points out that various BTC DATs, including Metaplanet and Nakamoto (NAKA), rapidly increased their holdings, with average Bitcoin cost bases surpassing $107,000.
With current spot prices hovering in the low-$90,000s, these firms are facing substantial mark-to-market losses.
This situation creates a significant negative narrative.
When a treasury trades significantly above its cost base, the market views it as a capital compounder managed by visionary leaders. Conversely, when it trades below, it is perceived as a distressed holding company.
The leverage inherent in this model—identified by Galaxy as price leverage, issuance leverage, and financial leverage—intensifies this distress.
Nakamoto, for instance, has plummeted over 38% in one month and more than 83% in three months, acting less like a structural proxy and more like a distressed small-cap.
For premiums to expand again, Bitcoin not only needs to recover but must maintain levels significantly above the $107,000 threshold. Only then can balance sheets be repaired sufficiently to persuade investors that “Bitcoin-per-share” is an asset on the rise rather than a liability in need of management.
The Return of Leverage Demand
The second necessity is a shift in market sentiment concerning leverage. The decline in DAT valuations signals that equity investors are currently shunning “unsecured leverage.”
In its analysis, Galaxy has characterized the DAT sector as a solution tailored for high-beta exposure in capital markets. Essentially, this allows funds to express a convex view on Bitcoin without engaging in the derivatives market.
However, in the current risk-averse environment, that convexity is working inversely.
As long as spot ETF investments remain weak and perpetual futures open interest remains low, there is minimal demand for additional leverage through equities.
Indeed, data from CryptoQuant reveals average weekly spot and futures volumes have decreased by another 204,000 BTC, bringing them to approximately 320,000 BTC—a level consistent with cycle-low liquidity.
Consequently, market turnover has stagnated, and positioning has turned cautious.
Given this scenario, an institutional investor is mathematically better off holding a spot ETF, such as BlackRock’s IBIT, if a DAT trades at 0.9x NAV. The ETF provides 1.0x exposure with lower costs, tighter spreads, and no execution risk or overhead from corporate governance.
Thus, for the DAT premium to re-emerge, the market needs to be in a “risk-on” mindset, where investors actively seek out volatility arbitrage opportunities from companies like MicroStrategy.
Data from Artemis supports this observation regarding “levered spot” penalties. With MicroStrategy down nearly 30% over the last month compared to Bitcoin’s 13% drop, the market is pricing in the fragility of the business model rather than its potential.
For the premium to return, derivatives indicators, like funding rates and open interest, need to show a renewed willingness to embrace risk that standard ETFs cannot fulfill.
Shifting from Offense to Defense
The days of “printing stock to buy BTC” at any cost are over. To regain investor confidence, corporate boards must shift from aggressive bitcoin acquisition strategies to a focus on balance sheet stability.
In early 2025, the market applauded indiscriminate accumulation. Now, it values long-term survivability.
MicroStrategy’s recent initiative to secure around $1.44 billion in cash reserves serves as a leading indicator of this transitional phase. This capital is intended to cover interest and dividend commitments, effectively fortifying its balance sheet to withstand a prolonged downturn without needing to sell assets under duress.
This change from “avoiding discounts” to “justifying premiums” is crucial.
Industry analysts had cautioned that the DAT model is susceptible to premium reductions. Now that such a reduction has occurred, boards must illustrate that future stock issuance will be rigorous and tied to clear value-creation standards.
If investors trust that new capital will be responsibly allocated, focusing on downside protection rather than chasing maximum gains, the mNAV multiple may increase once again.
Addressing Concentration and Indexation Risks
Lastly, the market must confront the significant concentration risks within the DAT sector.
Data indicates that MicroStrategy alone accounts for over 80% of the Bitcoin held in the DAT sector and represents around 72% of the sector’s total market capitalization.
This implies that the destiny of the entire asset class is closely tied to the liquidity dynamics and index status of MicroStrategy.
Moreover, the impending MSCI consultation on whether to exclude “digital asset treasury companies” from major indices represents a looming threat to the trade.
If MicroStrategy retains its inclusion in the index, passive purchasing from index funds can mechanically inflate its premium, lifting the rest of the asset class alongside it.
On the other hand, should it be excluded, this mechanical support would vanish, and the sector risks devolving into a collection of closed-end funds that continuously trade at a deficit compared to their underlying assets.
