VC firm Breed predicts that companies emulating Strategy’s Bitcoin treasury will run into danger during the next bear market.
Many Bitcoin treasury companies will inevitably fail, bringing the threat of systemic risk when they do, according to venture capital firm Breed.
Particularly vulnerable are firms with market values near the value of the BTC they hold, Breed said in a new report titled “The $Strategy Strategy Proliferation.”
In it, Breed argues that there are two types of Bitcoin treasury companies: those that add BTC as an investment separate from their main business operations, and pure-play Bitcoin treasury firms.
“Companies that simply add BTC to their balance sheets while continuing to focus on their core businesses will primarily be valued based on those core operations,” Breed said. It is the latter group that will see failures, Breed predicted.
These pure-play Bitcoin treasury firms live and die by a metric called multiple of net asset value, or MNAV, it said. This is the value the stock market assigns to the company, exceeding that of its BTC holdings.
With 597,325 BTC worth about $64 billion in its treasury and a market capitalization of $107 billion, Michael Saylor’s Strategy has an MNAV of about 1.7x.
Companies that copy it raise funds in two basic ways: by issuing debt or issuing stock. Debt is the dangerous component, Breed warns, outlining a seven-stage scenario of Bitcoin treasury failure.
“The existential threat is an extended bear market that erodes the MNAV premium just as sizable debt maturities come due,” Breed said.
In this scenario, a crypto bear market wipes out a firm’s MNAV, making it hard to refinance debt. If a large debt maturity comes due, the firm will be forced to liquidate its BTC at a loss, possibly causing the price of Bitcoin to drop further. Then the cycle repeats in a death spiral.
“New treasury companies face this risk even more acutely. Without Strategy’s scale, reputation, and passive index inflows, they will likely raise capital on tougher terms and at higher leverage ratios,” Breed noted. “In a downturn, those aggressive structures could accelerate margin calls and distressed BTC sales, amplifying downside pressure across the market.”
As more companies adopt Saylor’s playbook, the risk of failure grows. When that happens, stronger firms like Strategy will likely acquire the distressed assets at bargain prices, Breed predicts.
“Ultimately, only a select few companies will sustain a lasting MNAV premium,” the report concludes. “They will earn it through strong leadership, disciplined execution, savvy marketing, and distinctive strategies that continue to grow Bitcoin-per-share regardless of broader market fluctuations.”
