Bitcoin fund holdings decline signals model under stress
Institutional Bitcoin investment funds have experienced a 10% drop in BTC holdings since May, according to data analysis. Onchain metrics firm CryptoQuant found that total institutional Bitcoin exposure, including trusts, ETFs, and closed-end funds, fell from 1.33 million to 1.20 million BTC in three months. This trend raises questions about the long-term viability of the Bitcoin treasury model, as companies face financial strains.
The decline is attributed to falling company valuations that now sit below the net asset value of their Bitcoin assets. A major example is Strategy, a business intelligence software firm that holds the largest corporate Bitcoin treasury, which recently sold 1,638 BTC. Analysts point to a weakening of a demand-boosting mechanism where shares once traded above Bitcoin holdings, enabling new equity or debt issuance to purchase more BTC. This loop breaks when market cap dips below net asset value, diluting the financing process.
CryptoQuant uncovers valuation issues for Bitcoin treasury firms
CryptoQuant has identified that many Bitcoin treasury companies are seeing stock prices trade below the net asset value (NAV) of their BTC holdings. For instance, Strategy’s market net asset value (mNAV) is calculated as 1.03, considering $8 billion in company debt and preferred stock liquidation preferences. When using a basic share count, the company’s discount appears at 0.7, but this is neutralized when calculating the mNAV.
Experts argue this shift shows a decline in institutional demand, especially as companies issuing debt or equity see dilution when their stock prices fall under net asset values. This financial dynamic weakens the ability of treasury firms to grow their Bitcoin reserves through equity or debt issuance.
Coinbase Premium index reaches unprecedented negative streak
The Coinbase Premium index, which compares Bitcoin prices between Coinbase and Binance, remains negative for a record 93 consecutive days. Analysts suggest this is a necessary hurdle to overcome before a BTC price bounceback can occur.
Web3 marketing platform FOUR claims the prolonged negative premium is more indicative of weak demand than aggressive US selling pressure. At the same time, Citi recently lowered its BTC price projection to $53,000 by 2027, noting that ETF inflows have a significant impact on price trends. investors appears subdued, further highlighting a demand imbalance in the Bitcoin market.