Bitcoin Treasury Companies, Whither Thence

Core Insights - Over 160 publicly listed companies have adopted bitcoin as a core treasury strategy, collectively holding nearly a million BTC, which is about 4% of the circulating supply [1] - The initial phase of bitcoin treasury companies was characterized by narrative and replication, with MicroStrategy's strategy serving as a key example [2] - The sustainability of premium multiples based solely on storytelling and BTC holdings is questioned, indicating a need for companies to justify NAV multiples above one in more durable ways [3] Group 1: Current Landscape - Companies are trading based on their ability to deliver bitcoin per share rather than traditional earnings or cash flow [1] - Most companies have achieved market capitalizations above Net Asset Value (mNAV) multiples greater than one [1] Group 2: Future Strategies - Lever One: Yield as an Edge - Bitcoin treasury firms must demonstrate the ability to generate incremental Bitcoin per share through strategies like BTC-backed lending or Lightning infrastructure [4] - Yield strategies may involve locking up BTC in payment channels to collect fees, but they carry risks such as credit and counterparty risk [5] - Without a yield engine, dilution could lead to mNAV compressing toward one [5] Group 3: Risk Management - Lever Two: Leverage (Risk-Weighted) - Successful companies in the last bear market structured capital to survive forced liquidation rather than relying on large balance sheets [6] - Some BTC treasury companies are considering using their BTC as collateral for BTC-backed loans to obtain USD, which can be used for yield generation or purchasing more Bitcoin [6] - This approach requires rigorous risk management and cash flow modeling, emphasizing the importance of raising capital at a premium and maintaining long maturities [6]