Data shows that the majority of Ethereum treasury companies are trading below mNAV, showing the impact of the recent price crash.
Ethereum treasury company looks unhealthy
In a new thread on X, Charles Edwards, founder of Capriole Investments, discussed some metrics related to the Ethereum treasury company. A treasury company refers to a public company that employs digital assets such as Bitcoin or Ethereum as a reserve strategy.
The idea was popularized by Michael Saylor’s Strategy (formerly MicroStrategy), which transformed into a BTC finance company in 2020. Since then, the company has invested a whopping $47.54 billion, making it by far the largest holder of corporate digital assets.
Previously, companies focused solely on the number one cryptocurrency as a viable reserve asset, but this year has seen an increase in holders of ETH, the coin that ranks just behind BTC.
As the chart below shared by Edwards shows, the Ethereum Treasury frenzy peaked in August, but the associated growth rate has slowed since then.
The data for the institutional buying related to ETH over the last few years | Source: @caprioleio on X
From the graph, it is clear that the rate of change in Ethereum Treasuries remains positive even after the economic slowdown, suggesting that companies continue to make net accumulations. This means that despite recent outflows from spot exchange-traded funds (ETFs), institutional buying still outpaces the growth in crypto supply, albeit by a small amount.
While companies continue to accumulate, ETH Treasury’s business model may not be working well for many companies. As noted by analysts, the mNAV value of the majority of companies is less than 1.
The percentage of the companies that are trading below mNAV | Source: @caprioleio on X
mNAV stands for Multiple of Net Asset Value and is a metric that compares a financial company’s market capitalization with its total reserve assets. If the indicator is below 1 mark, it naturally means that the valuation of the company is lower than the value of the Treasury.
Currently, approximately 64.3% of all Ethereum treasury companies fall into this zone. “That means the situation at the Treasury is much more unhealthy for ETH than for Bitcoin,” Edwards explained.
It’s clear that ETH Treasuries are under pressure, but is anyone reacting by selling? Data shows that the net buy/sell ratio associated with them is still high, so not that much.
Looks like the buy/sell ratio has seen a drop in recent days | Source: @caprioleio on X
That being said, while nearly all Ethereum corporate holders are still net longs, the buy/sell ratio has started to show a decline as the asset price has experienced a recent bearish turn.
ETH price
Ethereum plummeted toward $3,000 on Sunday, but Ethereum has since risen modestly to $3,200.
The trend in the price of the asset over the last five days | Source: ETHUSDT on TradingView
Dall-E, featured image from capriole.com, chart from TradingView.com
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