The Hidden Dangers of Bitcoin Treasury Companies: What Smart Investors Watch For
Bitcoin treasury stocks may be the fastest way to make money in the coming gold rush, but they’re far from risk-free.
In this article, we break down the biggest threats investors need to keep an eye out for—and how to use the right tools to protect your gains.
TL;DR: What You Need to Know About BTC Treasury Risks
· BTC treasuries offer explosive upside, but come with unique risks, like mNAV implosion if BTC Yield decelerates rapidly, which can wipe out gains fast.
· High mNAVs increase drawdown risk if the company can’t maintain BTC Yield.
· Funding matters: Watch for early investors pulling out before the market tops.
· Leverage cuts both ways—debt boosts returns in bull runs but magnifies pain in bear markets.
· Leadership is critical—visionary CEOs who can be creative in their space drive long-term success and investor loyalty.
· Groupthink is dangerous—don’t mindlessly follow the hype, assuming that your bitcoin equity will keep going up forever. It’s a stock, not bitcoin, Laura.
The BTC Treasury Company Lifecycle
BTC Treasury Companies go through three phases:
1. Volatile penny stocks — with big dreams and outlandish promises.
2. Stable growth — where they put their money where their mouth is and do the hard work to source funding, gain trust and stack hard.
3. Mature BTC ‘banks’ — with slower BTC Yield and share price growth but substantial collateral that they can use to issue bitcoin-backed bonds.
It’s critical to understand which phase you’re in and act accordingly.
mNAV Meltdowns: The Silent Killer of BTC Stocks
The price of any BTC treasury company is the product of:
1. BTC price,
2. mNAV, and
3. BTC/share.
Share price = BTC ($) x mNAV x BTC/share
All of these things are interconnected.
But in an ideal world, they would all grow steadily together.
However, the reality is that a company can only manage its BTC/share growth, ideally while maintaining the mNAV within a healthy range (i.e., 3-5).
The mNAV is the premium that investors pay for the belief that a company will grow its BTC per share (i.e., BTC Yield). A smart BTC treasury company will structure its BTC purchases to achieve sustainable exponential growth in BTC per share for as long as possible.
It’s a Marathon, Not A Sprint
Running a BTC treasury company that grows and provides shareholder value over the long term is a marathon, not a sprint.
A great example of how to build a robust long-term BTC treasury is MetaPlanet, which has maintained a consistent BTC Yield of just under 1% for the long term.
As you can see in the chart below, they have plenty of room to continue to grow before running into the 21m BTC limit.
In contrast, SWC is a notable example of how to achieve massive initial, albeit ultimately unsustainable, returns. If they could continue their current BTC Yield of around 9% per day, they would hit the 21m limit on BTC in October 2025!
Investors pay a high premium (i.e. mNAV) for rapid growth (i.e. high BTC Yield). As soon as growth slows, mNAV collapses. With a current mNAV for 18, SWC have a long way to fall, especially if they fail to convert their premium to hard BTC before it’s too late.
The Exponential DCA
In a recent interview, CEO Andrew Webley discussed the importance of sequencing his purchases at a consistent rate and adhering to the plan. This is textbook BTC stacking, setting the stage for aggressive exponential growth.
Webley has stated in several interviews that he and Tyler Evans (UTXO) aimed to reach 1000 BTC faster than MetaPlanet. They’re certainly on track to achieve 1000 BTC in record pace, but it will be interesting to see what happens after that. At the current rate, they’re on track to hit 1000 BTC by 28 June 2025 (yes, that’s only a week from now).
Too Hot Not to Cool Down?
As you can see in the chart below, SWC has done a super impressive job of keeping BTC Yield incredibly higher for longer than any other BTC Treasury to date.
This is largely due to UTXO’s injection of funds, which amounts to an 18% stake (with no lock-in). It will be interesting to see if any of the major shareholders start to sell down their stake after they crash through the 1000 BTC target.
A Cautionary Tale: MSTR
Strategy took the opportunity to lever up and front-load their BTC purchases around the US election, when BTC was cheap, following the release of their 21/21 Plan in October last year.
Their mNAV blew up to 4, but their BTC Yield spiked. However, savvy investors took the opportunity to sell at the top, and both the share price and mNAV have been depressed since then.
In retrospect, it would have been interesting to see what might have happened if they paced their ATM and BTC buys. They might still have an mNAV above 3, which would enable them to run an accretive ATM.
If you think you’ve found a rock, take the time to make sure it’s not a shooting star, ready to crash back down to earth. All BTC Treasury companies will eventually tend towards mNAV = 1, but it’s crucial to find one that has a trajectory that aligns with your investment goals and timeframe.
Action: Look for a history of consistent BTC purchases over the long term with steadily increasing Bitcoin per share. High growth is great, but only when it is sustainable.
How to Print Shares Without Killing Shareholders
Both Strategy and MetaPlanet discussed the optimal mNAV window in their Q1 2025 earnings presentations. Strategy seems content to run the ATM at a mNAV > 2.0, but MetaPlanet’s target window is > 3.0.
The chart below shows why MetaPlanet believe that running the ATM between 3 and 5 is maximally accretive for shareholders. Below three, and we get increased dilution, but there are diminishing returns above 5.
If mNAV remains above 5, the company is leaving fiat on the table that they could convert to BTC. More investors will take the opportunity to take profits and harvest the mNAV themselves, especially if BTC Yield starts to slow and the higher mNAV can’t be justified.
If their DTC mNAV rises too much, they have a lot further to fall. There are still many people disgruntled with Strategy following the drop in mNAV from 4 to 2. Imagine investing in SWC with an mNAV of 19, only to see it drop to 2 over the next few months as BTC Yield reaches a natural ceiling.
A wise BTC Treasury Company could scale its ATM like a DCA strategy – when the mNAV is below three, it would deploy investor capital that it had already lined up. However, as their mNAV rises, they would turn on the ATM and run it at the maximum level if the mNAV is above five, and leave the investor's capital in the bank for later use. Ideally, they would use both the investor capital and the ATM to maintain a consistent BTC Yield, which will stay higher for longer.
Fortunately, DTC mNAV is a great leading indicator of whether a company is worthy of its exploding share price. A rising DTC mNAV will signal when your favourite BTC treasury might be slowing down, and it might be time to de-risk.
Action:
· Be wary of BTC treasury companies trading with a high mNAV
· Keep an eye out for slowing DTC mNAV to avoid rapid mNAV compression.
· If a BTC treasury company is relying primarily on their ATM to raise funds, a mNAV dropping below 2-3 is a problem. They are ‘dead in the water’ with no ability to raise funds to keep their BTC yield up.
When the Big Money Bails: Watch the Exit Signs
While many BTC treasuries start as ‘zombie companies’ that store their excess capital in BTC, others rely on an initial stimulus of private investor capital to get the flywheel going.
As more and more people realise the massive opportunity of following the Strategy playbook to kickstart a small BTC Treasury company, there is sure to be a few pump and dump schemes (a bit like meme coins), where private investors inject enormous amounts of money upfront only to pull it out when it becomes evident that they can’t get the company can’t get it’s flywheel going and survive on their own. The savvy early investor will then rotate their initial winnings into a new, smaller treasury and repeat the process.
Action:
· Keep an eye on major shareholders pulling out their money, especially if DTC mNAV is trending up.
· Take the time to research the major investors to see if you trust that they are in it for the long haul and have plenty of money to keep investing until the company develops their market.
· Make sure the company has a clear long-term investment strategy, declaring how it will continue to raise funds for the long term to maintain a consistent BTC Yield.
Leverage or Landmine? The Debt Time Bomb
Debt and leverage accelerate growth and volatility. But it also technically dilutes the mNAV. If it’s ever liquidated, a BTC treasury is only worth the value of its bitcoin minus its debt.
Currently, most BTC treasury companies are not overly leveraged (e.g., Strategy is at 19%, MetaPlanet has minimal debt, and Semler presently holds 22% debt).
Debt helps the company grow when BTC is trending up. However, if we experience a prolonged Bitcoin bear market, the debt/BTC NAV ratio will increase, and they will likely resort to running the ATM at a lower mNAV (and hence diluting shareholders) to reduce their debt.
Currently, BTC is positioned comfortably at the 63rd percentile, well away from the overleveraged FOMO zone. But by the time BTC reaches the 99th percentile, there’s a good chance that there will be plenty of overleveraged BTC treasury companies that will blow up if BTC pulls back suddenly.
Action:
· Be wary of companies carrying high levels of debt, especially if BTC is at the top of the historical power law quantile ranges or global liquidity is rolling over.
· Rather than just using BTC NAV, use BTC NAV minus debt to calculate the true mNAV.
Blind Belief is Not an Investment Strategy
It seems every new BTC treasury company has an X community of true believers. These are a great way of educating investors, but there is a risk that people will not see the risks as they emerge due to groupthink, all following the group leaders who is heavily invested in that stock and doesn’t want people to think about the next new exciting opportunity when it comes along or the growing risks of their current investment.
Action:
· Use tools like DTC mNAV to quantitatively compare companies agnostically to manage your investment risk and understand when the trend might be topping.
· Remember that BTC treasury companies go through stages. Once their BTC stack becomes larger, they cannot maintain a high BTC Yield, and their mNAV will trend towards 1.0, and hence, the share price will fall.
Visionaries Win: Why the Leader Makes the Company
While any company can follow the Strategy playbook, investors rally around charismatic leaders who can create their flavour of BTC treasury strategy in their unique context. Investors will stick with a company that they believe in through hard times rather than immediately rotating to the next fastest horse.
People talk about the ‘Saylor premium’ due to his regular podcast and conferences, where he communicates his vision and undying commitment to Bitcoin as something that will improve the world. Strategy has continued to innovate, solving new problems with new products as they come up, creating an arsenal of tools that others can emulate.
Similarly, MetaPlanet investors have rallied around Simon and Dylan, who have created their unique flavour of the playbook in the yield-starved Japanese market.
ALTBG’s Alexandre Laizet is another enigmatic character who deeply believes in creating shareholder value as fast as possible, creating unique bitcoin-denominated bonds with significant tax advantages in the French market.
In addition to studying the data, you need to believe in the leader and that they aren’t just in it for a quick buck, abandoning shareholders when things get hard.
Action: Look for a leader whom you believe in who can creatively forge their own path in their unique market.
Stay Ahead of the Pack: Watch the Metrics Others Ignore
With more BTC treasury companies rapidly emerging, the race to stack bitcoin is only accelerating. Investors will quickly rotate to the next fastest horse if their current pick underperforms. This space is going to be fast, lucrative, and volatile. Success will depend on your ability to track the right signals, manage risk proactively, and not get caught in the hype.
Action:
· Use objective tools like DTC mNAV to detect when a company is slowing down.
· Track BTC per share growth trends over time.
· Avoid companies with a soaring mNAV unless it’s backed by sustained performance.
· Be cautious of overleveraged firms, especially in bear markets.
· Watch for insider selling or signs of capital flight.
· Prioritise leaders with vision, transparency, and strategic pacing.
Investment Checklist:
Before your next move, run through this quick checklist:
1. Is BTC/share growing consistently quarter-over-quarter?
2. Is the current mNAV in the sweet spot (3-5) or dangerously inflated?
3. Has the company maintained healthy capital inflows without excessive dilution?
4. What’s the current debt-to-BTC NAV ratio?
5. Do I believe in the leadership’s long-term vision?
6. Are insiders or major shareholders reducing their positions?
7. Is DTC mNAV flashing any early warnings?
Track these metrics regularly, and you’ll stay one step ahead while others get blindsided.
Stay safe, have fun, and follow the data!