The recent crypto market correction has reignited questions about the durability of corporate Bitcoin treasury plays, but Matrixport researchers say the largest of them, Strategy, still appears on track for possible S&P 500 inclusion.
Despite recurring doubts about whether Strategy’s business model can withstand deep drawdowns, analysts argue that a forced, large-scale liquidation by the world’s largest corporate Bitcoin (BTC) holder is not a “near-term risk,” according to a Wednesday research report by Matrixport.
Instead, the real pressure from the recent correction is on the stockholders who bought the stock at an inflated net asset value (NAV), who are currently suffering the impact of the company’s NAV compression.
While Strategy’s shares fell from a peak of $474 to about $207, the company may still be poised for inclusion in the S&P 500 index in December, wrote Matrixport.
“When overlaid with Bitcoin, the shares now appear relatively cheap, and the possibility of S&P 500 inclusion in December still exists.”
However, investors should treat this as an important reminder of the importance of “timing and valuation” when it comes to investments, the report added.
Crypto market intelligence company 10X Research also predicted a 70% chance that Strategy will be added to the S&P 500 index before the end of the year, Cointelegraph reported on Oct. 29.
Strategy received a “B-” credit rating from S&P Global Ratings, placing it in the speculative, non-investment grade territory often associated with “junk bonds.”
This marks the first time a Bitcoin-treasury-focused company has received an S&P Global assessment, establishing a new potential benchmark for evaluating crypto treasury companies.
Falling mNAV Values Continue to Plague Smaller Corporate Crypto Holders
Concerns persist over the sustainability of smaller digital asset treasuries (DATs), as several companies saw their market net asset value (mNAV) fall below key thresholds this year, effectively limiting their ability to raise funds for further Bitcoin purchases.
The mNAV ratio compares a company’s enterprise value to the value of its crypto holdings. An mNAV above 1 allows a company to raise funds by issuing new shares to accumulate digital assets. Values below 1 make it much harder to expand capital and holdings.
Several DATs saw their mNAVs slip below this key level, including Strategy, Bitmine, Metaplanet (MTPLF), Sharplink Gaming (SBET), Upexi (UPXI) and DeFi Development Corp (DFDV).
While smaller treasury firms are starting to feel the pressure of the correction, Strategy’s executive chairman, Michael Saylor, said he is not concerned about another major Bitcoin downturn.
“The company is engineered to take an 80 to 90% drawdown and keep on ticking,” said Saylor, during an interview with Fox Business on Tuesday.
Strategy bought 8,178 Bitcoin worth $835 million in its latest purchase announced on Monday, marking a significant increase compared to the average Bitcoin investments of around 400–500 BTC over the past month.