Breed: Few Bitcoin treasury companies can survive the 'death spiral'

Only a few Bitcoin fund management companies have the ability to withstand the test of time and avoid the devastating "death spiral"; this will affect companies holding BTC trading close to the net asset value (NAV), defined as the total assets of a business entity minus liabilities, according to a report from venture capital company (VC) Breed.

The health of Bitcoin fund management companies depends on their ability to maintain an impressive net asset value ratio (MNAV), as the authors pointed out.

Breed's report outlined seven stages of decline for a BTC fund management company, starting from the decrease in Bitcoin price, leading to a reduction in MNAV, causing the company's stock price to approach its actual NAV.

Select Bitcoin treasury companies and their corresponding MNAV | Source: BreedThis, in turn, makes it more difficult for companies holding BTC to secure the necessary debt and equity funding for asymmetric transactions, converting inflationary US dollars into a limited supply and appreciating asset.

When credit access decreases and debt deadlines approach, margin calls will be triggered, forcing companies to sell BTC on the market, leading to further declines in BTC prices, causing a consolidation of holding companies being acquired by stronger companies, and potentially triggering a prolonged recession across the market. The authors of the report stated:

"Ultimately, only a few companies will be able to maintain a sustainable MNAV spread. They will achieve this through strong leadership, disciplined execution, clever marketing strategies, and specific strategies that help increase Bitcoin per share, despite the overall market fluctuations."

This death spiral could lead to the next cryptocurrency bear market. However, the authors also note that, since most current BTC fund management companies are funding their purchases with equity rather than debt, the collapse may be manageable.

"The 'death spiral' of a Bitcoin treasury company | Source: BreedEquity-based funding will limit the impact on the broader market. Nevertheless, the current forecast could change if debt funding becomes a more popular option compared to equity. Bitcoin fund management companies are becoming a prominent trend in 2025.

Michael Saylor's company, Strategy, began buying Bitcoin in 2020 and popularized the concept of BTC corporate funds, which has thrived over the past two years. Currently, more than 250 organizations, including corporations, government agencies, (ETFs), pension funds, and digital asset service providers, are holding Bitcoin.

Mr. Giáo