Crypto stocks suffered a red day on Friday, especially Bitcoin
Treasury companies such as Strategy (MSTR) and Semler Scientific (SMLR) – each down approximately 6%, even if Bitcoin slipped only a little more than 2%. Metaplanet listed in Japan is 24%lower.
The price action comes in the middle of a continuous debate which takes place on social networks on the sustainability of the game book by Michael Saylor (and those who copy it).
“Bitcoin cash companies are all the rage this week. MSTR, Metaplanet, twenty-one, Nakamoto,” said Lowstrife Bitcoin Twitter modestly followed. “I think their toxic lever effect is the worst thing that has ever happened to Bitcoin [and] What Bitcoin represents. »»
The question, according to Lowstrife, is that financial engineering that the strategy and other BTC cash companies employ to accumulate more Bitcoin is essentially based on the MNAV – a metric which compares the valuation of a company at its net value of the asset (in these cases, their Bitcoin vouchers).
As long as their MNAV remains greater than 1.0, a given company can continue to raise capital and buy more bitcoin, because investors show an interest in paying a bonus for exposure to stock compared to the Bitcoin Holdings of the company.
However, if MNAV decreases below this level, this means that the value of the company is even lower than the value of its assets. This can create important problems for the ability of a company to raise capital and, for example, pay dividends to some of the convertible tickets or privileged actions that it may have issued.
Shades of GBTC
Something similar has happened to Bitcoin Trust de Graycale, GBTC, before its conversion to ETF. A closed end fund, the GBTC during the 2020 and 2021 Haussier market has been negotiated to a constant increase in its value of assets, institutional investors have requested rapid exposure to Bitcoin.
However, when the prices turned south, this bonus turned into a terrible discount, which contributed to a chain of breaths starting with a capital highly effective and possibly spread to FTX. The resulting sales pressure made a bitcoin at a record level of $ 69,000 up to $ 15,000 in a year.
“Like the GBTC at the time, all the game now – all – is to determine how these BTC access vehicles will fall back, and when they will explode and make all this,” said Nic Carter, partner of Castle Island Ventures, posted in response to Lowstrife.
The thread also sparked MSTR Bulls responses, including Adam Back, Bitcoin OG and CEO of Blockstream.
“If Mnav <1.0, they can sell BTC and buy MSTR and increase BTC / Share in this way, which is in the interests of actions," he published. "Or people see it coming and don't let it go. Anyway, that's good."
