The collapse of the BTC treasury model

[alani123]

Recently we saw a catastrophic failure experienced by a company that was following the bitcoin treasury model:

https://www.dlnews.com/articles/markets/nakamoto-nosedives-in-blow-for-bitcoin-treasury-narrative/

Essentially Nakamoto Holdings' stock spiraled way below value when insiders were let to liquidate their stocks. As a result the stock led a 96% loss.

Now the whole "Bitcoin treasury" model is called into question:

https://www.dlnews.com/articles/markets/spiral-of-doom-as-one-in-three-treasury-companies-lose-premiums/

[r_victory]

I don't think it's a total collapse of the model; this may have been an isolated incident, even due to mismanagement. It needs to be thoroughly investigated to determine where they went wrong and to prevent it from happening again. From what I've read, it was the fault of PIPE (Private Investment in Public Equity), which allows select investors to buy shares at a fixed price before those shares can trade freely on the open market.

This reminds me of ICOs, where investors bought at a low price, the early birds, and when the listing was over, they dumped their tokens/assets at a high price, causing losses to those who entered late, and many of them no longer exist. Some are even active today.

[Zlantann]

Recently we saw a catastrophic failure experienced by a company that was following the bitcoin treasury model:

https://www.dlnews.com/articles/markets/nakamoto-nosedives-in-blow-for-bitcoin-treasury-narrative/

Essentially Nakamoto Holdings' stock spiraled way below value when insiders were let to liquidate their stocks. As a result the stock led a 96% loss.

Now the whole "Bitcoin treasury" model is called into question:

https://www.dlnews.com/articles/markets/spiral-of-doom-as-one-in-three-treasury-companies-lose-premiums/

The Bitcoin treasure model is a new initiative; businesses are bound to make mistakes. Some of these companies are copycats with little or no understanding of how firms like Strategy have been managing their Bitcoin Treasury. With the problems faced by Nakamoto Holding, other companies have learned about the dangers of Private Investment in Public Equity.

Some of these companies that are facing challenges due to this model have been in a financial mess for a long time. They are just using Bitcoin acquisitions to cover up their management lapses. Nakamoto Holding didn't buy any Bitcoin until last month, so its problems might not be Bitcoin-related. Others had to abandon the main product or services they offer to focus on just issuing Bitcoin-backed shares.

I don't think the situation is as bad as reported in these blogs. Many companies will rush into a new business model, and only the prepared and well-managed ones will survive.

[The Sceptical Chymist]

Sorry, the the "model" is nothing more than a mechanism to lure in investors to businesses that otherwise have a failing/mediocre core business model.  It happened to work for MicroStrategy (so far, but IMO it's still way too early to tell how things are going to play out), but there are biotech and other health care-related companies apparently trying to replicate MSTR's success and to me it just reeks of something very close to a scam.  Legally these crypto treasuries might not be considered such, but once again all of this is far too new to Wall Street--regulation and so forth usually have to play a catch-up game.

I love what crypto stands for.  I don't love what these Wall Street firms are trying to do with it, and even though I doubt we've seen the end of btc/ltc/whatever treasuries, I'm hoping the end is just around the corner.

[alani123]

Sorry, the the "model" is nothing more than a mechanism to lure in investors to businesses that otherwise have a failing/mediocre core business model.  It happened to work for MicroStrategy (so far, but IMO it's still way too early to tell how things are going to play out), but there are biotech and other health care-related companies apparently trying to replicate MSTR's success and to me it just reeks of something very close to a scam.  Legally these crypto treasuries might not be considered such, but once again all of this is far too new to Wall Street--regulation and so forth usually have to play a catch-up game.

I love what crypto stands for.  I don't love what these Wall Street firms are trying to do with it, and even though I doubt we've seen the end of btc/ltc/whatever treasuries, I'm hoping the end is just around the corner.

You hit the nail on the head with your assessment.

Nakamoto holdings (NAKA) merged with Kindly MD for trying to pivot to being a bitcoin treasury company.

To me, the fact that the U.S. legislature is currently so alinged with crypto these ponzi-like schemes aren't brought to justice by state prossecutors is crazy. Not that courts are famed for bringing justice to investors... But Main St. capital markets rely a lot on trust and if things continue to go down this path it's probably going to ruin the reputation of any company putting BTC in its treasury, even the few that are legit.

If you look at Kindly MD's history, they're drowning in debt. The Merger with Nakamoto Holdings just made it worse as insiders came aboard and were the first to exit among growing concerns that the company is overvalued.

And imagine, BTC/USD hasn't even fallen yet. The domino could be huge if MSTR is forced to start liquidating holdings.

[UchihaSarada]

Sorry, the the "model" is nothing more than a mechanism to lure in investors to businesses that otherwise have a failing/mediocre core business model.  It happened to work for MicroStrategy (so far, but IMO it's still way too early to tell how things are going to play out), but there are biotech and other health care-related companies apparently trying to replicate MSTR's success and to me it just reeks of something very close to a scam.  Legally these crypto treasuries might not be considered such, but once again all of this is far too new to Wall Street--regulation and so forth usually have to play a catch-up game.

Scammers quickly see the success of Strategy and know that they can join this trend and raise funds from investors very quickly and easily. While behind the scene, in any industry and any nation, there are scammers who can exploit the system and existing regulations for running their scam successfully. Even in a traditional banking industry with very long history, there are banks with bad managements, then have bankruptcies later.

If it can happen with banks, it can happen with companies in Bitcoin industry because it's very similar and basically the same. Collapse happens by bad risk and finance management which can happen with any company. Bitcoin can not fix this issue for any company as it is their own business problems.

[The Sceptical Chymist]

And imagine, BTC/USD hasn't even fallen yet. The domino could be huge if MSTR is forced to start liquidating holdings.

I'd been saying that for a while in the thread devoted to MSTR, but any dissent there will get one flamed to death--plus it hasn't happened yet, and MicroStrategy got in at an average bitcoin price much lower than the current spot price (if I'm not mistaken) so it doesn't look like they're going to be forced to liquidate anytime soon. 

By the way, I've had KindlyMD on my watchlist since I learned about this whole crypto reserve thing about a month or two ago.  They changed their ticker symbol, did they not?  Whatever the case may be, that's one of the companies that seems to have strayed so far from their original business model that they'd better have left with an enormous sack of breadcrumbs if they ever planned on returning to it.  And though it looks to skeptics (like you and I) like there's shenanigans going on, that's something regulators will have to decide--possibly through the courts if shareholders start filing successful lawsuits.