Bitcoin Is Surging, But Investors Are Still Worried About Bitcoin Treasury Companies. Here's Why They're Right.
Key Points
Bitcoin treasury companies aim to accumulate Bitcoin, often by issuing debt or equity.
This approach can work well in bull markets but tends to perform very poorly in bear markets.
There's no long-term value in a company that focuses entirely on owning a cryptocurrency.
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Bitcoin (CRYPTO: BTC) has had its best month since 2025, driven by a short squeeze and U.S. Treasury buybacks of long-term securities. It's up 24% this month as of Aug. 28. This recent surge is welcome news for Bitcoin treasury companies, which carry significant amounts of Bitcoin on their balance sheets.
However, there's still skepticism surrounding these companies. Case in point: Strategy (NASDAQ: MSTR), the company that holds the most Bitcoin, has an mNAV (market valuation relative to the Bitcoin it holds) of 1.06, down from 3.89 in late 2024. It used to trade at a hefty premium to its Bitcoin holdings. Now, you only pay $1.06 for every $1 of Bitcoin it owns.
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The low premium reflects less trust in the Bitcoin treasury model, and investors are right to be skeptical.
Image source: The Motley Fool.
The Bitcoin treasury approach only works in one direction
First, let's define what a Bitcoin treasury company is. Although many businesses own some Bitcoin, the term refers to companies whose primary purpose is to buy and hold the cryptocurrency. Tesla owns Bitcoin, but no one would call it a Bitcoin treasury company. Strategy, Twenty One Capital, and other companies that have adopted this approach focus entirely on Bitcoin accumulation.
These companies typically issue debt and equity to fund Bitcoin purchases. Strategy uses a flywheel method. When it trades at a premium to its underlying Bitcoin, it issues new shares and uses them to buy more Bitcoin. As a simple example, if Strategy has an mNAV of 2, it can buy $2 of Bitcoin for every $1 in shares that it issues.
This approach has worked well in previous bull markets. Ideally, the company's premium and the price of Bitcoin both increase, leading to outsize returns that act similarly to a leveraged Bitcoin position.
It gets crushed in bear markets. The premium collapses as the price of Bitcoin falls, amplifying losses.
Buying Bitcoin isn't a business model
The problem with Bitcoin treasury companies is that their business model doesn't produce anything of value. They don't sell any goods or services, or if they do, it's a footnote compared to buying Bitcoin. For example, Strategy still has a software business, but it made just $247 million in revenue over the first six months of 2026.
The sole source of value these goods and services arguably provide is financial engineering to buy more Bitcoin, which only works during favorable market conditions, as demonstrated earlier this year. Strategy needed to sell Bitcoin near the cryptocurrency's low point to replenish its cash reserves. It's one of several Bitcoin treasury companies forced to sell this year, with MARA Holdings and Empery Digital being two more notable examples. Others, including Satsuma Technology, have abandoned the business model entirely.
There's no long-term value in a business built entirely around owning a cryptocurrency. The financial engineering argument goes out the window when you consider that these companies were selling, not buying, the dip. Bitcoin already provides more than enough volatility without stacking the Bitcoin treasury model on top of it. If you want Bitcoin exposure, the safer option is to buy the coin directly or invest through Bitcoin ETFs.
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Lyle Daly has positions in Bitcoin and Tesla. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.
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