Key Takeaways
- • Mike Novogratz, CEO of Galaxy Digital, says the only path forward for distressed Bitcoin treasury companies is to convert into operating businesses with real products and services.
- • More than 60% of Bitcoin treasuries are sitting on unrealised losses from their last Bitcoin purchases, and nearly 40% trade below the value of their crypto holdings (NAV).
- • Nearly half of the Bitcoin treasury space trades at a discount to NAV, with no bottom in sight, according to DL News.
- • Novogratz said only three of roughly 50 treasury companies successfully executed the model, with Strategy and BitMine cited as the exceptions.
- • Ethereum treasuries have largely stopped buying; Tom Lee's BitMine holds more than 50% of Ether held across the $21 billion sector.
Summary
Bitcoin treasury companies, which accumulated crypto assets on the premise that holding the asset would drive shareholder value, are struggling after months of weak prices. According to DL News, more than 60% of Bitcoin treasuries are carrying unrealised losses on their most recent purchases, and more than 60% bought Bitcoin at prices well above current levels. Nearly 40% trade below the value of their crypto holdings, a threshold that once let these firms raise capital and buy more coins.
Speaking on a January 7 podcast with investor and former Trump Administration official Anthony Scaramucci, Mike Novogratz, CEO of Galaxy Digital, argued that the model no longer works for most companies. "You're not going to get shareholder value just by owning the underlying [asset]," he said, adding that management needs to turn treasuries into operating companies. He said that the approach that worked for Strategy, BitMine and, to some extent, Joe Lubin does not work for others, and that the remaining treasuries must either build conventional revenue models or continue trading as discount vehicles at 70 to 80 cents on the dollar.
Novogratz acknowledged that he was also caught up in the treasury boom, describing it as "a bit of a hype trade." He attributed the structural problem to spot Bitcoin and Ethereum ETFs, which offer direct exposure without the premium investors previously paid for treasury wrappers. Strategy, led by Michael Saylor, is up nearly tenfold since it began its treasury strategy in August 2020, but its stock is down more than 50% over the past six months, and few peers have replicated that performance, in Novogratz's words, "Three out of 50."
Asked how he would manage a distressed treasury, Novogratz said he would buy back discounted stock to narrow the gap to NAV, and would seek a business that draws on the firm's skill set. His example was to use the assets held, whether Bitcoin, Ether or Solana, to build something such as a neobank.
The Ethereum treasury sector has also largely halted purchases, with BitMine as the only major buyer adding Ether weekly.
Speaking on a January 7 podcast with investor and former Trump Administration official Anthony Scaramucci, Mike Novogratz, CEO of Galaxy Digital, argued that the model no longer works for most companies. "You're not going to get shareholder value just by owning the underlying [asset]," he said, adding that management needs to turn treasuries into operating companies. He said that the approach that worked for Strategy, BitMine and, to some extent, Joe Lubin does not work for others, and that the remaining treasuries must either build conventional revenue models or continue trading as discount vehicles at 70 to 80 cents on the dollar.
Novogratz acknowledged that he was also caught up in the treasury boom, describing it as "a bit of a hype trade." He attributed the structural problem to spot Bitcoin and Ethereum ETFs, which offer direct exposure without the premium investors previously paid for treasury wrappers. Strategy, led by Michael Saylor, is up nearly tenfold since it began its treasury strategy in August 2020, but its stock is down more than 50% over the past six months, and few peers have replicated that performance, in Novogratz's words, "Three out of 50."
Asked how he would manage a distressed treasury, Novogratz said he would buy back discounted stock to narrow the gap to NAV, and would seek a business that draws on the firm's skill set. His example was to use the assets held, whether Bitcoin, Ether or Solana, to build something such as a neobank.
The Ethereum treasury sector has also largely halted purchases, with BitMine as the only major buyer adding Ether weekly.
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