Key Takeaways
- While corporate HODL treasuries once offered companies a unique advantage, this model is increasingly ineffective.
- Modern investors are less interested in raw exposure to Bitcoin’s volatility and more focused on structured, consistent returns.
- By putting assets to work through yield strategies, businesses can remain competitive and avoid the pitfalls of outdated, purely passive treasury models.
Despite the market maturing immensely in the last few years, I’ve noticed companies and business leaders still cling to what worked in the past, without really knowing how or why it worked.
Nostalgia is a problem, but this has more to do with trying to repeat the successes of companies that saw massive gains a few years back.
There’s no better example than corporate “HODL” treasuries. Pioneered by Strategy (formerly MicroStrategy), this approach involves buying Bitcoin in excess and sitting on it indefinitely, thus turning it into a treasury reserve asset.
While it did work (and perfectly, I might add) for years, the market has matured since then, meaning the passive model just isn’t cutting it anymore.
I’d go as far as to say that it may also slowly turn into a major liability.
Why Are Passive Treasuries Passé?
Strategy is a bona fide legend at this point, for a simple reason: it had the guts to dive right into Bitcoin at a time when crypto was a regulatory minefield and volatile.
Starting in 2020, Strategy used company cash and issued debt to acquire BTC. In other words, Strategy became a sort of proto-ETF long before crypto ETFs were a thing.
It was the only way for TradFi-style investors to dip their toes into Bitcoin without getting it directly, they simply bought the company stock instead.
Since demand and volatility were present, the value of the stock quickly outgrew the company’s Bitcoin holdings. At one point, MSTR was trading at double the value of Bitcoin per share, and investors were still buying the stock.
To understand why this no longer works, you need to know the difference between market value and Net Asset Value (NAV). The former represents what investors are willing to pay, while NAV represents the worth of the company’s added assets.
More precisely, it’s the figure you get by deducting all liabilities from total asset value and dividing it by the number of shares.
However, the MSTR premium is slowly compressing. In other words, the market value is plummeting toward the actual value of Bitcoin.
While in its heyday, Strategy traded at a 200% premium, investors no longer require a proxy and can purchase regulated ETFs at a fair price. When new issuances spread the Bitcoin holdings across more shares, the NAV per share will naturally decrease.
If you entered as an investor paying a 100–200% premium, what will you actually be holding once the price converges to parity, or even drops below the underlying value of Bitcoin?
This is all the result of a mature market that is becoming less volatile. Investors now prefer funds and ETFs. Moreover, the Wild West era is all but finished.
Most investors I’ve spoken to require more than speculation; they are looking for consistent returns, efficiency, and most importantly, active management.
In such a world, passive treasuries are bound to dwindle, unable to meet the market’s demands.
What To do Instead of Buying and Waiting?
Since Bitcoin prices no longer fluctuate like oil prices and investors no longer want to hold indefinitely like chumps, what’s an approach that actually works?
Hands down – yield generation.
This alternative is all about making steady returns without even considering whether the asset’s price will go up or down. Non-directional in nature, yield generation strategies are potent regardless of the cycle.
True power lies in basis trading, relative value, and, where possible, arbitrage opportunities in this still evolving asset class.
Basis trade is quite simple: buy an asset in the spot market and sell the futures. If the futures outvalue the spot you snag the spread as profit. It’s a strategy where you’re not speculating but rather profiting from the difference.
Relative value requires significant data sets from Asset Managers to make informed decisions and Arbitrage, on the other hand, allows investors to profit from the price gap across exchanges.
These techniques are consistent, often managed by professionals, and risk-managed just like any other TradFi investment vehicle.
Why Corporate Leaders Need To Push for This Switch
If you’re not convinced yet, I don’t blame you. Going against the grain requires some real willpower. Nonetheless, remind yourself that copying MSTR is equivalent to stacking a bunch of Bitcoin under your mattress and praying for the best.
In a fast and mature era of crypto, holding simply isn’t enough to see sizable returns. Real capital is productive, and you need to get your hands dirty and put your assets to work if you want to survive the new crypto market.
Tipping the hat to Strategy, what they did back then was nothing short of extraordinary. Yet, trying to redo this in a world that no longer exists is ineffective and may eventually pull you down.
The market is ripe for picking, but only if you put that capital to work instead of watching idly while others get all the good fruit.
The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Stephen Wundke is the Strategy and Revenue Director at Algoz Technologies. Moved to Algoz in late 2022. At Algoz he pioneered the unique SMA structure, an off exchange settlement product called Quant Pro, using Zodia Custody and Bitfinex.
