The ongoing slump in cryptocurrency prices is affecting not only well-known assets such as Bitcoin (BTC) and Ether (ETH), but also pushing treasury companies specializing in digital assets into financial distress.
A report from crypto data company CryptoQuant identified Evernorth, an XRP-focused treasury firm, as an example of the difficulties companies in this sector are encountering.
Evernorth has reported unrealized losses nearing $78 million on its XRP investment, shortly after it was acquired.
Similarly, shares of MicroStrategy (MSTR), a pioneer in Bitcoin treasury investments, have fallen over 26% in the last month as Bitcoin prices have declined. CryptoQuant noted a staggering 53% decrease from MSTR’s peak stock value.
Despite these losses, MSTR retains a significant unrealized profit from its Bitcoin assets, with an average cost of around $74,000 for each Bitcoin, according to BitcoinTreasuries.NET.
On another note, BitMine, which holds a large stash of Ether, is encountering approximately $2.1 billion in unrealized losses due to its Ether reserves, as pointed out by CryptoQuant.
BitMine currently owns nearly 3.4 million ETH, having acquired more than 565,000 ETH in the previous month, as reported by CoinGecko.
Digital Asset Treasury Companies: Echoes of the Dot-Com Bubble
There’s a rising concern regarding the valuation of digital asset treasury companies (DATs), with analysts indicating that their market value is increasingly dependent on the performance of their crypto portfolios.
Some analysts, including those from the venture capital firm Breed, predict that only the robust players will survive, with Bitcoin-centric treasuries being in a better position to avert a “death spiral.” The risk arises from a significant fall in these companies’ market net asset value (mNAV), which is a measure comparing their enterprise value against the market value of their crypto investments.
There are parallels drawn between the evolution of digital asset treasury firms and the dot-com boom and bust from the early 2000s. This era was characterized by visionary entrepreneurs alongside those chasing fast profits.
Ray Youssef, founder of the peer-to-peer lending platform NoOnes, expressed skepticism about the future of most digital asset treasuries, suggesting many will likely disappear or collapse as the market realities become evident.
