The recent steep decline in the market-to-net-asset value (mNAV) of companies that hold large amounts of digital assets is amplifying market anxiety.
On Monday, Standard Chartered Bank warned that the falling mNAV of small to mid-sized digital asset treasury (DAT) companies is heightening market risk.
Shifting Landscape for DAT Firms
DAT firms are publicly traded companies that hold and manage cryptocurrencies and other digital assets as core business assets.
These companies raise capital by holding Bitcoin, Ethereum, and other digital assets as primary assets on their balance sheets. In contrast, traditional firms hold cash or bonds. This model allows investors to gain indirect exposure to cryptocurrencies through the company’s stock.
Strategy($MSTR) was highly successful because it generated cash flow while holding digital assets. However, many recent DAT firms primarily act as mere asset holders.
Standard Chartered analyst Geoff Kendrick pointed out that a crisis is brewing as these companies’ mNAVs plunge. The mNAV is the ratio of a company’s total market value to its crypto-asset holdings.
When this ratio falls below 1, it becomes difficult for the company to use its assets as collateral for new purchases. A further decline in digital asset prices could even force them to sell their holdings.
In a research report, Kendrick explained that the mNAV of several major DAT firms has dropped below this critical 1-to-1 ratio. This could lead to a short-term weakening demand for cryptocurrencies like Ethereum (ETH) and Solana (SOL).
Kendrick predicts that this trend will ultimately lead to a market shake-up in the long term. He believes that weaker, under-capitalized firms will face market pressure. The market will force them out, leaving only large DAT companies like Strategy and Bitmine to survive.
He added that ETH-focused DAT companies hold a more favorable position than SOL holders. This advantage comes from their asset size.
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