When Price Volatility Meets Shareholder Pressure
When price volatility and shareholder pressure combine, even treasury companies can instantaneously shift from “guardians” to “sellers.” This article attempts to deduce the potential market pathways for BTC treasury companies over the next 6 to 12 months. The article is based on a piece authored by Cheshire Capital and is organized, translated, and written by Odaily Planet Daily.
(Background Summary: Pantera Capital Research: The Alchemy of ETH by BitMine)
(Background Supplement: Bitcoin Reserve Companies: Why Spend $2 to Buy $1 of BTC?)
Editor’s Note:
In recent months, BTC treasury companies have been viewed as crucial drivers in the cryptocurrency market and strong pillars supporting Bitcoin’s price. However, the reality may not be as solid as imagined. When price volatility and shareholder pressure converge, even treasury companies can quickly transform from “guardians” to “sellers.” This article attempts to explore the potential market pathways for BTC treasury companies over the next 6 to 12 months. The core assumptions are as follows:
- Main Body: 10 BTC treasury companies holding varying amounts of Bitcoin, with market value to net asset value multiples (mNAV) ranging from 1.0x to 5.0x.
- Differentiation: Company quality is determined by treasury size and management’s beliefs/marketing abilities.
- Background: The initial price of Bitcoin is set at $120,000.
- Core Logic: Once some companies choose to sell BTC to repurchase shares, a reflexive loop will be triggered: price drops → mNAV is pressured → more companies are forced to sell → selling intensifies → price further declines.
Main Text:
Assuming there are 10 BTC treasury companies holding Bitcoin, and they have different trading premiums (mNAV multiples) in the secondary market, ranging from 1.0x to 5.0x. At this point, the BTC price is $120,000. Their quality varies, with “quality” here depending on the size of the treasury and the management’s beliefs and market promotion capabilities.
Some low-quality BTC treasury companies are the first to fall below 1.0x mNAV. For teams lacking strong conviction, the most rational move is to sell part of their Bitcoin to repurchase shares. After all, in the short term, this can bring a per-share net worth enhancement effect. Note that these companies are selling part of their BTC at the price of $120,000.
Due to the aforementioned sell-off, the price of Bitcoin retreats to $115,000 (this price is mainly used for illustrating the deduced scenario). Some other treasury companies (including those that have already conducted buybacks) experience further declines in mNAV due to the highly correlated Beta effect with BTC. Consequently, another 4-5 companies sell Bitcoin to repurchase shares, selling at the price of $115,000.
The market gradually realizes that among the ten companies, eight or nine are probably more concerned about the short-term defense of shareholders rather than long-term BTC accumulation. Investors begin to anticipate that if these companies collectively need to sell 30% to 50% of their holdings, the consequences will be dire. After all, even MSTR fell to a valuation level of 0.5x during the lows of 2022. Thus, BTC is quickly repriced to $100,000, and most treasury companies also fall below 1.0x.
Some medium-quality treasury companies, which were previously hesitant, begin to face dual pressures from the market and shareholders, forcing them to maintain mNAV, thereby joining the sell-off. At this point, the market sees weekly sell orders of about $500 million to $1 billion in Bitcoin. Even high-quality companies (such as MSTR, 3350, XXI) struggle to defend as the price drops to about 1.2x. BTC falls to $90,000.
The entire treasury company system, including high-quality players, now falls below 1.0x. MSTR preferred shares dip below $0.70 against a $1 par value, and rumors even emerge that Saylor is considering suspending dividends. Some companies previously regarded as staunch holders (such as 3350, XXI) also begin selling Bitcoin to cover operating costs. BTC drops to $80,000.
By this time, most low-quality treasury companies have almost completely emptied their BTC reserves. Early “bottom fishers” begin to enter the market, but the cruelty of the reflexive loop lies in the fact that sell-offs will propagate up the quality chain, further amplifying the scale and speed. As medium to high-quality companies also completely surrender, the largest Bitcoin holdings begin to enter the market, with weekly selling pressure reaching up to $1.5 billion to $3 billion.
It is important to note that, aside from MSTR, BTC treasury companies collectively hold approximately 350,000 Bitcoins, valued at about $40 billion at current prices. This selling pressure is sufficient to last a long time, and if MSTR is also forced to participate, the situation could become even more brutal, with BTC potentially dropping to $70,000.
Possible Outcomes:
The lowest quality companies may actually benefit. Because they were forced to sell BTC early, they avoided lower prices. The problem is that once they sell, the company is no longer an “iterative BTC treasury” but has transformed into a “one-time valuation game.” Even if they only sell once, it would tarnish their reputation as a “diamond hand treasury company,” leading to significantly reduced future inflows.
If one believes that BTC still possesses a 30-40% annual compound growth rate (I believe!), then companies that hold on will ultimately be fine. As of now, I believe only Saylor will do everything possible to hold onto BTC, but there may also be other candidates (such as 3350, NAKA). However, until most of the sell-offs are completed, no treasury company is worth a long-term bullish outlook.
The moderates fare the worst. They are neither aggressive “sharks” nor possess enough conviction. In the above scenario, such companies (like MARA, RIOT, SMLR) would sell in stages (6) to (7), with an average selling price of about $75,000.
This logic also applies to treasury companies for other assets, but ETH may be an exception. This is because ETH treasury companies operate within an oligopolistic framework: BMNR and SBET hold about 75% of treasury ETH (if DYNX and BTBT are included, the proportion reaches 90%). This allows them the opportunity to form some kind of coordination or “collusion” to avoid a vicious cycle of competing sell-offs. Although the likelihood of maintaining such an agreement is low, the chances of success increase under higher concentration of holdings.
This can be likened to the banking syndicate during the Archegos collapse in traditional finance. Aggressive banks (like Goldman Sachs and Deutsche Bank) cleared their positions first, resulting in far better outcomes than those slower players attempting to coordinate their exits (Credit Suisse, Nomura).
Note: The BTC target price mentioned here is not $70,000; the prices in the article are merely used to illustrate the deduced scenario.
