Strategy’s market net asset value (mNAV) compared to Bitcoin (BTC) its holdings dropped to 1.174 on Oct. 10, the lowest level in almost two years.
The company’s shares fell 3% to $307.95 amid broader weakness in the crypto market, translating to a market cap of $88.4 billion. Strategy is the 121st-largest US public company, holding 640,031 BTC, worth approximately $75.4 billion.
As of press time, Bitcoin traded at $117,824, down by over 3% in the past 24 hours. The narrowing gap between market capitalization and underlying asset value poses a threat to the sustainability of corporate Bitcoin treasury strategies.
Falling mNAV leads to a feedback loop
Geoffrey Kendrick, head of digital assets research at Standard Chartered, warned that maintaining a mNAV above 1.0 remains essential for digital asset treasury (DAT) companies to expand their holdings. Values below that threshold signal weaker balance sheets and potential consolidation.
Additionally, Strategy and similar treasury companies face mounting pressure from PIPE financing structures that funded their Bitcoin purchases.
According to a Sept. 25 CryptoQuant report, Bitcoin treasury stocks consistently gravitate toward discounted PIPE issuance prices, resulting in losses of up to 55% for current investors.
The pattern creates a feedback loop. PIPE investors purchased at substantial discounts and hold registration rights, allowing public sales after filing resale statements.
Once lockup periods expire, selling pressure weighs on share prices, compressing premiums to underlying Bitcoin holdings.
Why does it matter?
Consequently, companies trading below 1.0 mNAV face severe constraints. Without premium valuations, treasury companies cannot issue equity at attractive prices to fund additional Bitcoin purchases.
The model depends on maintaining premiums that justify dilutive capital raises, with CryptoQuant noting that only sustained Bitcoin rallies could prevent further stock declines.
As a result, Strategy’s falling premium to levels not seen since Feb. 8, 2024, raises an alert. Seeing the company that started the DAT movement with a compressing mNAV is not a bullish signal for the market.
Although not sufficient to put the company in any sticky situation, extended periods below 1.0 mNAV could trigger death spirals where companies cannot raise capital to service debt or fund operations.
This spiral would force asset sales, pressuring Bitcoin prices, and leading to further corrections.
