MSTR and SMLR Pull Down Major Crypto Companies

Crypto stocks faced significant declines on Friday, particularly bitcoin treasury firms like Strategy (MSTR) and Semler Scientific (SMLR), both experiencing drops of about 6%, even as bitcoin itself fell just over 2%. Metaplanet, listed in Japan, suffered a staggering 24% decrease.

When looking at the broader picture, MSTR shares trading at $376 showcased a steep decline of over 30% from their peak reached in late 2024, despite bitcoin reaching new heights in value this week.

This activity coincides with ongoing discussions on social media regarding the long-term viability of Michael Saylor’s strategy—along with others emulating him—to accumulate substantial bitcoin reserves.

“Bitcoin treasury firms are indeed in the spotlight this week. MSTR, Metaplanet, Twenty One, Nakamoto,” commented a moderately influential figure on Bitcoin Twitter, lowstrife. “I view their toxic leverage as potentially detrimental to the essence and values of bitcoin itself.”

According to lowstrife, the financial strategies employed by Strategy and similar companies to secure more bitcoin hinge on mNAV—an evaluation of a firm’s market valuation relative to its net asset value, specifically pertaining to their bitcoin portfolios.

As long as mNAV stays over 1.0, a company can continuously attract capital to buy more bitcoin, because investors display a willingness to pay a premium for such equities as compared to the company’s actual bitcoin assets.

However, dropping below this threshold signals a scenario where a company’s overall worth falls beneath the intrinsic value of its holdings, which can drastically hinder its capacity to generate funds or distribute dividends on outstanding convertible notes or preferred stocks.

Echoes of GBTC

A comparable situation unfolded with Grayscale’s bitcoin trust, GBTC, before it transitioned to an ETF. During the bullish market of 2020 and 2021, GBTC enjoyed increasing premiums above its net asset value as institutional investors chased rapid access to bitcoin.

However, this premium transformed into a significant discount during market downturns, contributing to crises that began with the heavily leveraged Three Arrows Capital and eventually extended to FTX. The resultant sell-off saw bitcoin plummet from an all-time high of $69,000 to $15,000 within a year.

“Much like what occurred with GBTC in the past, the current scenario revolves around assessing how much more bitcoin these access mechanisms will amass, and when they might collapse and release everything back into the market,” remarked Nic Carter of Castle Island Ventures in response to lowstrife’s statements.

The conversation also elicited responses from supporters of MSTR, including Adam Back, a well-known figure in the Bitcoin space and CEO of Blockstream.

“If mNAV is less than 1.0, they can liquidate some BTC and repurchase MSTR, thereby enhancing the bitcoin per share, which aligns with shareholder interests,” he wrote. “Alternatively, investors may preemptively act to prevent that from happening. Regardless, this situation remains acceptable.”