Galaxy Digital CEO Mike Novogratz stated that the Bitcoin and Ethereum treasury company model has reached a critical breaking point, and companies that started with this structure now have to choose between “transforming or slowly disappearing.”
In a podcast with investor and former Trump administration official Anthony Scaramucci, Mike Novogratz argued that simply holding crypto assets is no longer a sustainable business model. According to Novogratz, with a few exceptions like Strategy and BitMine, treasury companies need to transform into businesses with real products and services.
Novogratz stated, “Holding the underlying asset alone does not create shareholder value. Management needs to transform these structures into real companies.”
According to the current situation, approximately 40% of Bitcoin treasury companies are trading below the net worth (NAV) of their crypto assets. Moreover, more than 60% of these companies purchased Bitcoin at prices significantly above current market rates.
A similar stagnation is occurring on the Ethereum side as well. Novogratz noted that buying in the market has largely stopped, and that the only major company continuing regular purchases is BitMine, which has accumulated more than 50% of the ETH in the $21 billion Ethereum treasury ecosystem.
Novogratz admitted that he too had been caught up in the hype. “We all got caught up in hype trading at some point,” said Novogratz, adding that the NAV premium no longer works and almost half of the entire Bitcoin treasury space is trading at a discount. According to the renowned investor, the fundamental reason for this is structural: thanks to Bitcoin and Ethereum ETFs, investors can now access the asset directly and don’t have to pay a premium for treasury shares.
Novogratz noted that Strategy’s treasury strategy, launched in August 2020, resulted in an approximately tenfold increase in share price, but that this success has largely remained unparalleled.
“Out of 50 companies, only three have actually managed to pull this model out. The rest need to get out of their own holes,” he said. Even Strategy shares have fallen by more than 50% in the last six months, indicating increasing pressure on the model.
When asked what he would do if he were managing a struggling treasury company, Novogratz said the first step would be to buy back discounted shares to close the gap between NAV and its share price. However, he said the real solution would be to develop a new business model based on the company’s existing human resources and asset base.
According to Novogratz, who says, “If you hold Bitcoin, Ethereum, or Solana, you can use that capital to start a neobank, you can create a real product,” the mere story of ‘holding crypto’ is no longer a marketable strategy.
*This is not investment advice.
