Shares in publicly traded Bitcoin treasury firm Strategy (MSTR) have fallen more than 50% over the last 6 months, but BitMine Immersion Technologies Chairman Tom Lee said the company made a sensible move when it recently announced a cash reserve amid Bitcoin’s falling price.
The reserve, a $1.44 billion tranche of funds built to help pay shareholder dividends, was launched earlier this month, providing the Bitcoin behemoth with an outlet to pay dividends even during BTC downturns. It’s a move that could help Strategy avoid selling some of its $61 billion stash of Bitcoin.
“In the last downturn of Bitcoin, Strategy traded below net-asset-value (NAV). It’s going to happen,” said Lee. “But it’s really—how is the company prepared for that downturn? I think they’re doing the smart thing, they’ve now announced a cash reserve of $1.4 billion—smart.”
BitMine, the largest Ethereum treasury firm with over $12 billion worth of ETH, has also been holding onto cash, Lee said, even if it hasn’t announced a dedicated U.S. dollar reserve.
“We’ve been running cash the entire time,” he said of BitMine. “We don’t want anyone to ever think we’re not going to be around. We’re going to have $400 million in staking revenue, and $1 billion in cash—nothing can really happen to BitMine.”
Digital asset treasuries are typically evaluated based on their mNAV, the ratio of the firm’s market cap to its net asset holdings. In other words, an mNAV of 1 means that the company trades in line with the value of its holdings.
Depending on a firm’s mNAV, its financial flexibility shifts and it may take different actions to benefit shareholders. Recently, many digital asset treasuries have seen their mNAVs dip below 1, leading to moves in order to try and benefit shareholders.
For example, recently when trading below an mNAV of 1, Ethereum treasury firm ETHZilla sold some of its ETH holdings to repurchase shares, in a move aimed at benefitting shareholders. Others, like SharpLink Gaming, have repurchased shares instead of buying ETH in the same scenario.
According to Lee, those digital asset treasuries that trade below a 1 mNAV are taking various paths to try and achieve a premium, but it’s still unclear what will ultimately pan out.
“I think they’re all trying different things. I don’t know what’s going to work,” he said. “I think if a DAT is trading below NAV, they are having an existential issue.”
The hype around digital asset treasuries has worn off considerably as the year has gone on, and crypto prices have declined, highlighted by major stock price declines and mounting unrealized gains for newer firms.
“It’s an object lesson for both crypto builders and stock investors,” Lee said of the trend. “For crypto builders, they thought building a DAT was simply: ‘Let’s put together a team, put some famous names on it, and we’re going to be 100x on the stock.’ But that was a little naive.”
Meanwhile, he said, the equity investor has learned that just because a firm has crypto on its balance sheet, that it doesn’t mean it will outperform the underlying asset.
“What’s happened this year,” Lee said, “is both sides have kind of sobered up.”
