As a sector ‘guy’, we have seen many hot sectors later turn ice-cold in the last 40 years (Biotech, Internet, Precious Metals. Psychedelics, Solar, and Patents), and then provide shorter term gains of 200-300% in numerous rebounds. And gains can be many times that, for longer term investors who had a five year gameplan. Think Amazon in 2002.
On the flip side, think Marijuana 2017 – 2019, since it had the most insane run, which we’ll add has a very real possibility of a rebound (a sustainable one that is) ahead. We think precious metals are in the second inning of their run, in case you were wondering, looking out 5-7 years (or a long run).
We’re close to coming up wth a strategy for Bitcoin Treasury Stocks. Were leaning towards shore fishing, which is similar to bottom fishing. Just haven’t quite figured it out yet. We even registered the domain, BitcoinTreasuryStocks.com! So it’s coming.
The wild card with these companies is they may be valued on a third-party asset, which they have NO control over. If Bitcoin goes to $20,000 – there will be nowhere to hide. If it goes to $1 million, the rising tide will lift all (most) boats.
The best formula we can conjure up for valuing these companies is rather simple.
First we’ll note, the definition of a bitcoin strategy has morphed in the past year. It used to be a regular company, doing regular business, that then decides that instead of holding their cash in money market funds, they would hold it in Bitcoin. It could be another asset, like real estate or even an ETF fund. but it is no longer cash, it’s an asset, subject to change in value.
Which is a bit scary. Corporate cash is corporate cash and it should liquid and not suject to changes in value, up or down. Forget that debasement theory.
OUR SIMPLE FORMULA
Using the old Bitcoin Treasury strategy.
1. Ask yourself what was the company worth (market cap) pre-bitcoin treasury strategy. Say $200 million, including $10 million in cash.
2. They take the $10 million cash and buy bitcoin. If the bitcoin doubles to $20 million, then the market cap should be $210 million. Pretty simple, but scary.
Using the new version Bitcoin Treasury strategy.
Take all the cash they have in treasury, maybe borrow some cash, and maybe sell stock and take that cash, and in put it into an asset (an asset is not cash) called Bitcoin.
3. Or, instead of using their cash, they keep that in the money market (for a rainy day) and they sell $100 million in shares (for cash) but instead of putting that cash in a money market, they buy Bitcoin. The market cap should now be $300 million. This (excluding a premium or discount on the bitcoin) is what investors should expect the market cap to be on day one.
If bitcoin falls 50% (by $50 million) then the market cap should decrease by the same amount. Note the day of the bitcoin purchase should not effect the stock price, just the market cap, because there would be more shares outstanding to offset. This in our opinion goes from scary to very scary.
4. If however in the second example, bitcoin doubles from $100 million to $200 million, then we could see the market cap (in our minds) at $300 million which would very nicely affect the stock price.
Personally we don’t like the strategy. Like when you go out drinking. When you get your bar tab, you reach in your pocket to pull out the bill $100 to pay your $100 bar tab. But if it’s not cash it’s bitcoin, so you go in your pocket and pull out $20. Wait, it was $100, when you left the house.. but not now.
So the opportunity, like back in the day of closed ended funds, is to look at companies trading at a discount to the total enterprise value (the old company value plus the bitcoin). This is called net asset value (NAV). If you’re bullish on bitcoin and the company is selling for a discount to NAV, by all means go ahead. In that instance it make more sense than buying bitcoin outright.
But if it’s at a premium, keep searching.
Former Darling Canopy Growth (CGC)
See Full Article on Business Insider.
- Digital asset treasuries have boomed in 2025.
- Companies that announce pivots to bitcoin have seen their stocks initially soar on the news.
- A report from 10x Research says investors have been badly burned by the trend.
It’s been a big year for companies announcing pivots to bitcoin, and according to analysts at 10X Research, the trend hasn’t been a boon for investors.
In just the last few months, everything from a vape company, to a European soccer investment firm, to an energy solutions provider all announced that they would start amassing crypto, resulting in massive spikes in their share price.
This strategy provided a seemingly straightforward way for struggling companies to rise above the penny stock line, buoyed by the rising crypto market. Following the example set by Strategy founder Michael Saylor, who went all-in on bitcoin in 2020, hundreds of firms have converted their businesses to bitcoin holding companies this year.
But a new report says their time in the sun may be ending, and retail investors have paid a hefty price for rushing into the bitcoin treasury frenzy as many stocks have come tumbling back down to earth.
Realted: Bitcoin Treasury Companies: Visionary Strategy or Risky Gamble?
“For retail investors, however, the picture is stark,” analysts at 10X Research said a note at the end of last week. “They’ve effectively lost around $17 billion, as new shareholders overpaid for Bitcoin exposure by an estimated $20 billion.”
10X Research: After the Magic: How Bitcoin Treasury Firms Must Evolve Beyond NAV Illusions
The trend that allowed the stocks to thrive has reversed. Buoyed by endless bullishness for bitcoin, Strategy and other companies were able to sell shares at a hefty premium relative to the value of their underlying crypto holdings.
“They conjured billions in paper wealth by issuing shares far above their real Bitcoin value—until the illusion vanished,” the report’s authors said. “Now, those once-celebrated NAV premiums have collapsed, leaving investors holding the empty cup while executives walked away with the gold.”
They added that “the era of financial magic is over; from here on, success will depend on trading discipline, market timing, and genuine alpha generation.”
That isn’t to say that 10X’s analysts believe all DAT stocks are doomed. They added that they believe some companies in the space can succeed but only if they pivot to an operational model rooted in actual strategy, rather than simply increasing exposure to a volatile asset.
But the report went on to say that companies pursuing digital asset treasury plays should not rely on retail investors to fuel another rally.
“With NAVs now having fully round-tripped, retail investors have lost billions—and many likely lack the conviction to keep adding to their positions.”
Check out Business Insider’s picks for best cryptocurrency exchanges
BTW we have an issue with a $17 billion loss headline, like ‘retail traders’ are idiots. They are not. Many get in, and then they get out. Sometimes hourly. They just don’t buy at the peak and then ride it all the way down. The editor of the article above, calculates the peak market value of group and then subtracts the current value and bingo, a $17 billion loss. For one it totally ignores all the money made when a stock trades from $3.00 and $60.
For two, it also ignores the float. If a stock is 90% held by insiders and runs from a $10 million market cap to a $100 million market cap and then back to $10 million, the $90 million ‘loss’ (excluding trading which is impossible to calculate) was held by insiders. We have friends which this happened to in 2002. And they didn’t necessarily ‘lose’ money either. The insiders simply saw their net worth go from $9 million to $90 million and then back down to $9 million. It’s just headline grabbing and bad reporting.
Just saying.
