BTC Treasury Companies : why would you want to pay $2 for $1 of BTC ?
Full‑Stack Treasury Flywheels
What is the goal of a $BTC treasury company ? It is to increase the BTC per share ratio, ie the ratio between their total BTC stack, and the number of fully diluted shares of the company.
Microstrategy is NOT trying to time BTC and to make USD gains on their BTC trade, their only focus is to increase this BPS (bitcoin-per-share) ratio, by adding $BTC to their balance sheet in an accretive way.
We call NAV the size of their BTC stack, and we call mNAV premium the ratio between their market cap and NAV. If a company’s market cap is at $10bn and they are holding $5bn worth of $BTC, then the mNAV premium of the company is 2. (Let’s also say that the supply of shares is 100 million at $100 a share, and that the $BTC price is $100k. That means that the company is holding 50k BTC, and that the BTC per [1000] share ratio is 50000/100000 = 0.5).
The primary way a BTC treasury company boosts its BPS is through an “ATM” (at‑the‑market) program: it issues new shares, sells them directly into the market, and uses the proceeds to buy more BTC. That’s what I call the first leg that a treasury company can use.
First leg : equity (ATM)
If we go back to my example, the $10bn company could issue $1bn worth of new shares, sell them into the market, and then immediately buy $1bn worth of $BTC with the cash. Assuming the price of the stock and of BTC did not move (that’s just to understand the maths behind it), then the new market cap of the company is $11bn and their new NAV is $6bn. Their mNAV premium is now 11/6 = 1.83, so it has decreased, but their BTC per (1000) share ratio is now 60000/110000 = 0.545, so it has increased. We can then define a “BTC yield” which is the growth of the BPS : 0,0545/0,5 = 1.09 ie 9% yield.
The company has acquired more BTC in an “accretive” manner : even if there has been dilution in the number of shares, this dilution has been accretive in terms of BPS, because this ratio went up.
This operation is the most common operation used by BTC treasury companies and it can only be done if the company is trading at a premium to its NAV, ie with a mNAV premium higher than 1. The higher the mNAV premium is, and the more accretive these ATM operations are, producing a higher “BTC yield”.
Basically what happens is that the company’s management is dumping into the short-term buyers of the stock at a premium, and they capture this gain to the benefit of the long-term holders of the stock. (But obviously a short-term buyer can become a long-term holder, so one can rationally accept to buy at a large premium if one thinks it’s worth it in the long-term)
This “arbitrage” between the market cap of the company and its treasury can also theoretically work the other way around : if the company trades at a significant discount to its NAV, then the management can decide to sell BTC in their treasury to buy back shares, and this operation would also increase the bitcoin-per-share.
In both cases, the management is trading against the short-term traders of the stock that are either buying at a significant premium or selling at a significant discount, and the gains that are captured in these operations are redistributed to the long-term shareholders, who see their BPS increased, which means the theoretical “floor” price of their shares is going up in BTC terms.
In practice, the most appealing operation for the company by far is to sell shares at a high mNAV premium because selling when the mNAV trades at a discount is more tricky : first, it can negatively impact the price of the underlying (BTC) if your size is large enough (that’s true in the case of Strategy), resulting in a potential “death spiral” (where both BTC and the stock price are going down). Second, it sends a negative message to the market because it makes the company look weaker, and it also decreases its size. And finally, there could be tax implications in this operation that make it less profitable.
So you can consider that a BTC treasury company will be mostly focused on selling shares at a high mNAV to increase BPS and generate BTC yield. One interesting thing to note is that given the fact that a shareholder buys a BTC treasury company for its BTC yield, a higher BTC yield justifies buying such a company at a higher mNAV, which is also what will then enable the company to keep producing a higher BTC yield. A higher mNAV is both a cause and a consequence for a higher mNAV.
“This sounds unsustainable, it only works as long as there is a greater fool to buy at a premium!” Yes, that’s mostly true, which is why a BTC treasury company that ONLY relies on selling equity (ATM) is a crippled vehicle, and any ambitious BTC treasury company should also use the second instrument for generating bitcoin yield : using debt on top of equity.
Second leg : debt (leverage)
The way a company should use debt is very straightforward : if you think $BTC is growing at a certain CAGR (= yearly ROI), then you can issue fixed income instruments that have a lower interest rate than this CAGR, and you “capture the difference” in the form of a BTC yield.
I won’t get into the specifics of which debt instruments a company might use, but suppose it can borrow at 8% per year and expects BTC to compound at more than 20% annually. The firm could borrow USD, buy BTC with the proceeds, and capture the 12% spread (20% − 8%), which then flows back to shareholders through a higher BPS ratio.
Obviously I know that people are incredibly scared of leverage, and tend to think that you can’t take ANY leverage EVER in crypto or you are guaranteed to blow up, but : 1/ I have written a whole article (soon-to-be-updated) about Microstrategy to show that their leverage is very conservative and that the likelihood that they blow up is incredibly low, and 2/ it's obviously possible to outperform BTC by using modest leverage, especially when you're protected by the duration of the debt.
A simple mental model to understand the type of leverage involved with a company like Microstrategy, is to imagine a 1.2x levered long on BTC that can only be liquidated if BTC trades below the theoretical “liquidation price” for like 3 years.
If a company is able to permanently acquire more BTC by also using some leverage on top, it will be able to have a treasury which outperforms BTC, and hence provide a BTC yield to its shareholders. A long-term shareholder can treat the BPS ratio as a theoretical floor for the price of his share, and this floor is permanently going up in BTC terms. A BTC treasury company is basically designed as an instrument that outperforms $BTC. This is why some people buy these companies at a premium to NAV for a long-term hold without being the suckers.
For example, in 2024, $MSTR generated a +75% BTC yield for their shareholders. This means that if the floor of your share price was 0.001 BTC at the beginning of 2024, it became 0.00175 BTC at the end of the year. If you were buying MSTR at 1.75x mNAV at the beginning of 2024, the entire 75 % premium you paid over NAV was fully recouped in just one year.
Because the market anticipates the future BTC yield that a company will be able to provide to its shareholders, it makes perfect sense to buy a company at a premium to NAV, and the “selling $1 of BTC for $3” narrative is complete nonsense.
What’s the path for a full-stack treasury company growth ?
So, to recap the previous 2 parts, a “full-stack BTC treasury company” should have 2 legs : the first one is equity and the second one is debt. Usually, they start with equity and use the ATM to spark the flywheel. By building a consistent track record of regular BTC purchases, the company builds trust as a BTC treasury company that strictly follows the Saylor playbook, which pushes investors to value them at a high mNAV premium, and allows the company to generate a decent BTC yield as a consequence.
Using the ATM helps to grow the size of the company, and once they’ve reached a certain scale, they can start issuing fixed income instruments, which justifies the higher mNAV that they can then “use” again to scale up even more, and repeat the process as long as they can.
“And how long is that ?” Well, as long as the BTC CAGR is meaningfully larger than the interests they have to pay on their debt, so I guess it can last a lot longer… Obviously, the main factor that defines the speed at which such a company can grow is how large their mNAV premium is, and that’s defined by the market, it depends on attention, on how reliable the company looks, on how charismatic the CEO is, etc.
Another general rule is that the mNAV is supposed to decrease over time as the size of the company grows, but that does not meant that the premium will end at 1, a mid/long-term equilibrium mNAV could very well be >1.5. It also does not mean that buying at a very large premium on a small company is a bad idea, because it can be justified if the BTC yield provided by the company is large enough. As I wrote earlier, each ATM operation decreases the mNAV premium without necessarily meaning that you underperformed the underlying (BTC) in the same time. A company could decrease its mNAV from 5x to 2x while both the prices of BTC and of the stock remained flat in the meantime, theoretically.
What about alt treasury companies ?
Now that I covered the BTC treasury companies, what about the altcoin treasury companies ? Well, they are based on the exact same model. But there is obviously a huge difference because using an altcoin as the underlying asset means using a much weaker asset with a much smaller likelihood of being “up only”.
This implies that using the fixed income leg is significantly more dangerous, and is a path that most of these companies probably won’t use. If your altcoin trends back to zero over time, as most do, then borrowing USD at 8% (or even 4%) a year to purchase the altcoin is clearly a terrible idea.
Maybe the best framework to think about these treasury companies is the one presented by Guy Young (founder of Ethena) here :
An altcoin treasury company would simply be a vehicle that gives an imperfect access to an altcoin to the public market (and its huge size). It’s good for the stock buyers because it’s still better to buy the underlying at a premium than to not be able to buy it at all (if they are bullish), and it’s good for the altcoin because it brings strictly new flows compared to only the crypto native pool.
But the altcoin treasury companies remain crippled vehicles compared to the BTC treasury companies, as they are unable to use both of the legs (equity + debt) that can generate BTC/crypto yield. This means that the mNAV of these companies is much more likely to trend towards 1, and even trade at a discount. But that’s not true of the BTC treasury companies.
As for the ETH treasury companies, they could very well copy the entire Saylor playbook by using fixed income instruments too. If you think that the long-term CAGR of ETH is similar as for BTC, then it’s a great idea, but if you don’t have that level of conviction on the future of $ETH, then it’s much more hazardous to issue debt to buy ETH.
Take‑aways
1/ A true “full‑stack” treasury has two legs
Leg 1 : Equity/ATM monetises the mNAV premium and is the key tool for scaling the company
Leg 2 : Debt monetises the spread between BTC CAGR and borrowing cost.
2/ mNAV premium >1 can be very rational :
If BTC yield (BPS growth) ≥ premium paid, long‑term holders still win.
3/ Alt treasury names are one‑legged, ie crippled vehicles :
Without the debt leg they should drift toward 1X mNAV (or lower) in the long-term
Superb breakdown 🤛