Corporate Bitcoin treasury strategy under pressure as institutional fund reserves decline 10%: Report
The viability of companies holding Bitcoin in corporate reserves faces scrutiny as major institutional investment products reduce their BTC positions.
Institutional investment products focused on Bitcoin (BTC) have reduced their collective BTC reserves by 10% from May through present day, with analysis indicating a sector under stress and potentially "breaking."
Key points:
- A comprehensive 10% decline in Bitcoin holdings across institutional investment funds has occurred during the past three months.
- Analysts warn the corporate Bitcoin treasury strategy is "breaking" as firms' market valuations slip beneath their net asset value.
- The Coinbase premium indicator has remained in negative territory for an unprecedented 93 consecutive days.
Fund exposure drops as Bitcoin treasury companies face squeeze
According to information from blockchain analytics firm CryptoQuant, the aggregate institutional exposure to BTC, encompassing trusts, exchange-traded funds (ETFs) and closed-end funds, has contracted from 1.33 million down to 1.20 million BTC across the three-month period.
This reduction arrives simultaneously as corporate treasuries, representing another significant Bitcoin institutional investment category, experience turbulence. Strategy, a business intelligence software firm maintaining the largest publicly-held corporate Bitcoin treasury, liquidated 1,638 BTC during the previous week.
Bitcoin treasury companies once amplified demand through a reflexive financing loop. Their shares traded above the value of their Bitcoin holdings, allowing them to issue equity or debt, buy more Bitcoin and reinforce the premium. That mechanism weakens when market capitalisations fall below net asset value, and financing becomes dilutive.
Novaque Research, contributing analyst
CryptoQuant draws attention to the challenging position of multiple Bitcoin treasury firms whose stock valuations have fallen beneath the net asset value (NAV) of their cryptocurrency reserves. For Strategy specifically, whether a discount exists depends upon the calculation methodology employed.
Using basic share count calculations, the discount stands at 0.7 as of Thursday's market close, however when incorporating the company's $8 billion in outstanding debt along with the liquidation preference attached to its STRC preferred stock, the modified NAV (mNAV) reaches 1.03.
"The on-chain evidence supports a loss of institutional demand, although it cannot directly isolate treasury companies," CryptoQuant notes.
Coinbase Premium sees record negative stint
The simultaneous decline across both investment fund exposure and Bitcoin corporate treasury positions arrives during a period when the Coinbase Premium index continues experiencing an unprecedented 93-day streak of negative measurements.
As previously covered by Cointelegraph earlier this week, the Index, which calculates the pricing differential between Coinbase's and Binance's BTC/USDT trading pairs, has maintained negative values since early May — establishing a record duration.
Market analysts view the Premium's return to positive territory as a necessary condition for BTC price recovery. During the current week, FOUR, a Web3 marketing platform, contended that the origin of this extended negative period cannot be attributed solely to widespread selling pressure from United States investors.
Until the premium flips positive, institutional buying from U.S. investors appears muted—suggesting this is more of a demand shortage than aggressive selling.
FOUR, Web3 marketing platform
In research commentary cited by Reuters during the previous month, Citi identified ETF capital flows specifically as an "important driver of prices" while simultaneously revising downward its BTC price projection to $53,000 extending through 2027.