In 2025, the emergence of digital asset treasuries (DATs) has marked a significant shift in the cryptocurrency landscape, with Strategy leading the charge as the largest corporate holder of Bitcoin with an impressive 650,000 BTC. However, the model used by these treasuries is beginning to face scrutiny, as numerous companies find themselves trading below their actual crypto assets. This downward trend is highlighted by a metric known as market to net asset value (mNAV). When mNAV drops below 1, it indicates that the company’s market valuation is less than the net worth of its Bitcoin holdings.
The growing concern surrounding Strategy’s stability has led to speculation of potential trouble for the company, particularly as its mNAV has contracted to levels reminiscent of the harsh conditions seen during the 2022 crypto winter. Historical data shows that Strategy’s mNAV peaked at 7.34x in September 2020 and hit a low of 0.49x in May 2022.
Critics argue that Strategy essentially operates as a leveraged bet on Bitcoin, poised for collapse if the cryptocurrency’s price declines further. Over the past year, Strategy’s shares have plummeted by 55%, igniting questions about the sustainability of its approach. Notably, the legendary short seller James Chanos has publicly derided the DAT business model as “silly.” He has previously indicated that investors are better off purchasing Bitcoin directly rather than through intermediaries that may add leverage without adding value.
Chanos outlined that while Strategy has sought capital during Bitcoin’s bullish phases, it has struggled to attract investment when prices dip, much like the decline witnessed in 2022. Despite the turbulent climate, some maintain that the firm remains transparent in its operations, offering weekly disclosures and the potential for its software business to break even, thus indicating a buffer against immediate financial distress.
In a bid to bolster investor confidence and address concerns over its financial liabilities, Strategy announced the formation of a $1.44 billion reserve to manage dividend payments and other outstanding debts. According to CEO Michael Saylor, this reserve will allow the company to navigate short-term market volatility more effectively. The plans for this reserve may include issuing new equity if stock prices rise above a certain threshold or liquidating some Bitcoin holdings if prices fall.
Experts interpret this reserve as a mechanism to alleviate immediate financial pressures, suggesting it signals stability for both shareholders and rating agencies. Yet, critics like Peter Schiff are vocal about their skepticism, dubbing Strategy a potential fraud facing imminent bankruptcy.
In response to the ongoing turbulence, Mark Palmer, an analyst at Benchmark, argues that the notion of declaring Strategy as doomed based solely on short-term fluctuations in Bitcoin prices is misguided. He emphasizes that Strategy’s capital structure is designed to withstand volatility across different market cycles. Currently, the company’s total annual interest expense on its considerable debt—a figure amounting to $778 million—is significantly lower in relation to the value of its Bitcoin holdings.
As the debate around Strategy’s viability continues, analysts and commentators remain divided. Some argue that the decline in mNAV does not equate to doom, as seen during the bearish trends of 2022 when the company remained financially stable. Factors such as the need to pay dividends on its preferred stock present a more tangible risk than the mNAV metric.
Others suggest that panic surrounding Strategy may be premature, asserting that while the company is indeed vulnerable to Bitcoin market fluctuations, it retains a sounder position compared to its peers. Furthermore, they note that the current Bitcoin price has not yet dipped below Strategy’s average purchase price, indicating that the firm has not yet realized losses on its investments.
As of now, inquiries made to Strategy have yet to receive a response, leaving the market eager for clarifications on the company’s strategies moving forward amid a fluctuating cryptocurrency market.
