Market Downturn Hits Digital Asset Treasury Holdings
The crypto market’s extended decline since mid-October has created significant challenges for digital asset treasuries, with recent price drops triggering nearly $1 billion in liquidations in just one hour as Bitcoin fell below $82,000 on Friday morning. This downturn has created a dual problem for these companies – their stock prices have declined alongside market sentiment, while their unrealized losses from crypto holdings have increased substantially.
Strategy, the company that pioneered the digital asset treasury approach, has seen its stock price decline over the past year. However, the firm maintains an optimistic outlook, noting that at current Bitcoin levels, it has “71 years of dividend coverage assuming the price stays flat.” Their crypto holdings currently show $7.48 billion in unrealized gains. Interestingly, prediction markets suggest only a 6% chance that Strategy will sell any Bitcoin before year’s end.
Growing Unrealized Losses Across the Sector
Other major players following the digital asset treasury model have experienced significant unrealized losses in recent weeks. BitMine Immersion Technologies stands out with Ethereum holdings showing approximately $4.44 billion in unrealized losses according to Bitmine Tracker data. Metaplanet and SharpLink have also taken substantial hits, with roughly $682 million and $695 million in losses on their Bitcoin and Ethereum positions respectively.
Galaxy Digital and Forward Industries face similar challenges, holding significant paper losses across their diversified crypto portfolios that include Bitcoin, Ethereum, Solana, and Hyperliquid. The declining valuations have compressed a key financial metric, pushing market-cap-to-net-asset-value ratios below 1 for many companies in this space.
Financial Metrics Under Pressure
The falling prices have created a difficult situation where companies trade below their net asset values. BitMine trades at 0.73x mNAV, while SharpLink and Forward Industries trade at 0.82x and 0.74x respectively. This creates additional challenges for raising capital through equity offerings.
Armando Aguilar, head of capital formation at TeraHash, describes the current situation as “two realities” for digital asset treasuries. While their holdings’ value has dropped sharply on paper and market caps have followed, most companies can still operate because they have enough cash to cover operations – at least for now.
Sustainability Concerns and Market Impact
The critical question becomes how sustainable this position remains if prices continue falling. When mNAV falls below one, companies face increased difficulty raising cash through equity offerings, creating pressure to find alternative liquidity sources. Aguilar explains that “when a company trades far below the value of the assets it holds, pressure slowly increases” as investors question the strategy’s viability.
Forced selling becomes unavoidable only when companies can no longer fund operations or convince markets to support their long-term plans. While some digital asset treasuries approach this point, Aguilar notes that “the group overall hasn’t yet faced an immediate liquidation risk.” However, if multiple companies are pushed to sell, the impact could create “a steady source of downward pressure, not a sudden shock” on crypto markets.
Ultimately, recovery for these digital asset treasuries depends on resolving macroeconomic uncertainty, which would likely catalyze recovery in risk-on assets including Bitcoin. Such a scenario could improve investor sentiment and attract capital inflows, potentially reversing the current trend of declining valuations and mounting unrealized losses across the sector.
