Bitcoin Treasury Stocks: From High-Flying Premiums to Underwater Nightmares?
The DAT Model Implodes: Who Didn't See This Coming?
Alright, let's be real. Anyone who bought into the "bitcoin treasury company" (DAT) hype over the last year—thinking they were some kind of genius—is probably kicking themselves right now. Galaxy Research called it back in July, and now it's playing out in gruesome detail: the equity premium that made these companies fly is gone. Kaput. Down the drain.
These companies—Strategy (MSTR), Metaplanet (3350.T), Semler Scientific (SMLR), Nakamoto (NAKA)—were basically riding high on a liquidity derivative, some kind of financial engineering trick that amplified gains...until it didn't. Now? It's amplifying losses. Shares are trading below net asset value (NAV), and the whole damn thing is turning into a race to the bottom.
The October 10th Deleveraging Event
And of course, it was that October 10th deleveraging event that really hammered it home, right? Some "forced-selling cascade" that flushed leverage out of the system. Translation: a bunch of over-leveraged idiots got margin called and tanked the market for everyone else. Real smart.
Triple Leverage: A Recipe for Disaster
Galaxy Research points out that these DAT equities combined "operational, financial, and issuance leverage." Which sounds impressive until you realize it just means they were tripling down on risk. So, yeah, the upside was great but the downside? Fuggedaboutit.
Nakamoto's Plunge and Unrealized Losses
Look at Nakamoto. Down over 98% from its highs. That's not an investment; that's a memecoin-level wipeout. And even "stable" bitcoin is down 30%. These treasury companies were supposed to be leveraged plays, not total implosions.
I guess that's the problem with financial engineering though, ain't it? It works great on paper, until reality smacks you in the face.
Unrealized losses are piling up. Metaplanet went from bragging about $600 million in profits to nursing over $530 million in losses. How can anyone take these jokers seriously?
The End of Equity Premiums
It's not just the losses, it's the premiums—or lack thereof. Equity premiums to NAV have been compressed to nothing. No more magic share issuance, no more free money. The party's over, and now it's time to pay the bill.
A Personal Aside: Rent Woes
Oh, and speaking of bills, I gotta vent. My landlord just jacked up my rent again. Said "market rates" are up. Yeah, well, so is my blood pressure. This city is becoming unlivable. Maybe I should just move to a yurt in Montana and start mining bitcoin... nah, scratch that. I'd probably screw it up.
Darwinian Phase: Survival of the Fittest (and Luckiest)
So what happens now? Galaxy Research lays out three "plausible outcomes," which basically boil down to: things stay bad, some companies die, and maybe, maybe, if bitcoin moons again, some of them get a second chance.
Bankruptcy Lawyers and Strategy's Advantage
"Selective survival and consolidation"—that's code for "bankruptcy lawyers are gonna be busy." The companies that over-issued, over-leveraged, and bought high are gonna get eaten alive. Strategy's sitting on a $1.44 billion cash reserve? Good for them. They're the sharks in this pond now.
A Skeptical Outlook on Future Premiums
And the idea that these companies will "regain modest equity premiums and reopen the issuance flywheel" if bitcoin hits new all-time highs? Please. Fool me once, shame on you; fool me twice, shame on me. I'm not buying that again. These companies now look less like simply “leveraged upside on BTC” plays and more like path-dependent instruments whose payoffs depend heavily on issuance strategy and entry timing. And I don't see a path for them.
This Was Always a House of Cards
Look, if you bought into the bitcoin treasury company model, you got played. It was a high-risk gamble dressed up as sophisticated finance, and now the chickens have come home to roost. Maybe I'm wrong, offcourse, but that's what I see.
