The market is starting to flood with companies focused on crypto treasures like Bitcoin (BTC), Ethereum (ETH), and Solana (SOL), but most investors probably don’t value them very much.
Spotted by Bitwise Chief Investment Officer Matt Hogan Misunderstandings cause these companies to trade significantly above or below reasonable levels..
“There is a lot of poor analysis of companies that hold crypto treasuries,” Hogan said. “Specifically, we see a misconception about whether they should be trading at the same level, higher or lower than the value of the assets they own (what is known as mNAV).”
Why does mNAV control companies that hold crypto treasuries?
mNAV (market net asset value) measures a company’s market capitalization relative to the market value of the cryptocurrencies it has on its balance sheet.
If this ratio is less than 1, the stock will trade at a discount. If the cost exceeds this amount, we will charge a surcharge. Hougan offers a simple yet powerful approach. “The first question to ask when analyzing a company that owns cryptocurrencies is: What would the company be worth if its useful life were fixed?”
The first key is Businessman mentioned an exercise where you have to imagine your company going into liquidation. “If the company announced that it would close trading this afternoon and distribute all of its Bitcoin to shareholders, the price would immediately adjust to the exact value of those holdings and the mNAV would be 1.0.” However, extending the period to 12 months creates an inevitable adjustment.
For the second key, Hogan identifies the following: Three reasons why virtually all companies are undervalued With the Treasury of Cryptocurrency. The first is temporary illiquidity. Investors ask for a discount because “no one would pay 100 percent right now for Bitcoin that they would only receive in a year,” which Hogan easily puts at about 10 percent.
Third, experts say that in the U.S. regulatory environment, there is only one compelling justification for companies holding crypto government bonds to trade above mNAV, and that is the ability to sustainably increase the amount of crypto assets per share.
Four real paths to crypto treasury
Mr. Hogan observed four practical ways to achieve the objective. Justifying companies that trade virtual currency government bonds at high prices (i.e. above mNAV). Its goal is to sustainably increase the amount of digital assets per share.
The first is to issue bonds in dollars and allocate the funds to buy more crypto assets, a method that Strategy, the publicly traded company with the most BTC, has successfully used during rising Bitcoin prices. However, as reported by CriptoNoticias, the company is listed below the market value of its digital currency holdings and is on the brink of reclassification, which could result in its being kicked out of major stock indexes.
the second will pass Lend out part of your holdings and collect interest in the same currency. A third uses derivatives, such as selling covered call options, to generate additional income to buy back more assets, but this means giving up some of the upside potential.
The fourth method is to acquire cryptocurrencies at a discount by buying blocked lots, other companies that are trading below their value, buying back their own stock, or acquiring profitable companies that are using their cash flow to accumulate more cryptocurrencies.
Decisive benefits for companies holding crypto treasury
“While most of the factors that create discounts are certain, the factors that enable premium pricing are uncertain,” Hogan summarizes. Therefore, The majority of companies holding crypto treasuries will trade at a discount. And only a few exceptional companies can do it at a premium
In addition, size also plays a decisive role. Larger companies issue debt on more favorable terms, lend more, have access to more liquid derivatives markets and complete acquisitions that smaller companies would not consider, he says.
Hogan’s conclusion was clear: “Over the past six months, all companies with crypto treasuries have risen and fallen in unison. In the future, we will see more pronounced differentiation. Companies that perform well will trade at a premium, while those that fail will trade at a deep discount. These three keys allow us to distinguish one from the other in advance.”
