CoinShares: окончание эпохи казначейств в криптовалютном бизнесе Translation: CoinShares: the end of the treasuries era in the cryptocurrency business

The bubble surrounding companies with treasuries in Bitcoin and other cryptocurrencies (Digital Asset Treasury — DAT) has largely deflated. This assessment was shared by James Butterfill, the head of research at CoinShares.

In August 2020, Strategy became the first publicly traded company to announce the addition of digital gold to its balance sheet. The initiative aimed to diversify assets and manage currency risks.

«It also aligned with the increasing interest of many corporations in distributed ledger technology and the potential efficiency gains from integrating blockchain infrastructure into existing operations,» noted Butterfill.

In practice, the strategy announced by Michael Saylor’s company morphed into a means of investing in cryptocurrency using borrowed funds. Many newcomers to the sector followed a similar path, issuing shares not to grow their businesses but to amass larger quantities of digital assets.

«However, this led to a decline in interest and influx of funds into the sector, simultaneously casting doubt on the viability of such strategies,» emphasized Butterfill.

As a result, treasury companies began to leverage as many funding sources as possible to rapidly increase their holdings of cryptocurrencies, hoping that price increases would offset the effects of the downturn.

Butterfill believes that the correction in the crypto market has laid bare the structural flaws of DAT.

The diminishing interest from investors was compounded by a lack of operational cash flows.

Many treasury companies incur losses from traditional business activities. Although these losses are relatively small compared to their crypto reserves, they may exert selling pressure on digital assets, the expert pointed out.

In a liquidity shortage, the obligation to pay dividends and interest could lead to the urgent liquidation of cryptocurrency holdings. Meanwhile, most DATs attracted funds through equity issuance, and their debt burden is not excessively high.

The exception is Strategy, which has outstanding loans totaling $8.2 billion and a volume of preferred shares with dividends amounting to $7 billion. In total, this signifies annual obligations for the company of about $800 million. To cover these payments, the firm has already established a fiat reserve of $1.44 billion.

A much more pressing question for CoinShares is what will happen after the mNAV (market value relative to Bitcoin reserves) of sector participants falls below 1. This metric compares a company’s market capitalization with the value of its crypto reserves.

«Has the DAT bubble already burst? In large part, yes,» wrote Butterfill.

In the summer, shares of many entities in the sector traded at a premium of 3x to even 10x. However, the median mNAV has now dropped below one. As of the time of writing, it stands at 1.16 for Strategy.

CoinShares sees two main scenarios unfolding:

«We lean toward the latter scenario, especially considering the improving macroeconomic situation and the potential for a rate cut in December, which should generally support markets,» noted Butterfill.

Additionally, companies with a negative mNAV premium may present attractive acquisition targets for more resilient competitors, he added.

«The end of the DAT bubble does not signify the collapse of the treasury concept. Instead, we anticipate a reevaluation,» emphasized Butterfill.

According to CoinShares experts, the sector will begin moving toward clearer categorization, with investors gravitating toward participants with specific strategies.

Another group consists of corporations using Bitcoin as a macro-hedging tool but not aiming to be classified as DATs. Existing examples include Tesla, Trump Media, and Block.

It is worth noting that JPMorgan analysts connected the short-term prospects of Bitcoin with the financial sustainability of Strategy.

In November, investors accused the bank of a coordinated attack on the company.