Bitcoin News: Retail Investors Lose $17B in Indirect Bitcoin Bets, Says 10X Research

Retail investors lost $17 billion attempting to gain Bitcoin exposure through firms like Metaplanet and Michael Saylor’s Strategy, driven by excessive equity premiums.

A new report reveals significant losses for retail investors now. Specifically, they lost an estimated $17 billion in indirect Bitcoin bets. This was during the process of pursuing exposure using digital asset treasury firms. These firms have Metaplanet and Michael Saylor’s Strategy prominently. The losses are mostly due to excessive premiums for equity, to begin with.

Metaplanet Valuation Falls to Match Actual Bitcoin Holdings

The equity premiums made it possible for these companies to issue shares now. Consequently, the valuations were way ahead of their actual crypto holdings at that time. What’s more, their prices have gone on to collapse dramatically. This decline left the bag held by a multitude of individual investors. Therefore, this brings to light the risk of purchasing the stocks of crypto-heavy companies.

Related Reading: BTC News: Metaplanet’s Value Drops Below Its Bitcoin Holdings | Live Bitcoin News

According to analysts at Singapore-based 10X Research, the financial magic is coming to an end. They made this observation in a report released on Friday. In the past, Bitcoin treasury companies were able to successfully build huge paper wealth. They did this through issuing shares at inflated values easily. This practice resulted in an obvious overpricing of share premiums at the onset.

The report argues that investors paid much more at that time. Specifically, they paid masses more than the actual value of the underlying Bitcoin. Metaplanet, which is the fourth-largest bitcoin treasury company, is a good example of this. Its market capitalization is down considerably recently. Consequently, the valuation is more closely tied to its Bitcoin holdings.

Furthermore, there is the case of MicroStrategy, led by Michael Saylor, that went through a similar cycle. The company saw volatility of its net asset value now. Therefore, this pattern confirms a wide market correction is taking place. Indirect Bitcoin bets refer to getting exposed without owning anything. These investments include companies with massive stockpiles of Bitcoin.

These indirect bets are also covering publicly traded crypto industry firms now. Specifically, this involves mining companies and blockchain technology providers actively. Additionally, financial instruments such as futures and options are also used for speculation. Moreover, Exchange-Traded Funds (ETFs) store related stocks of the crypto sector currently. Thus, the risk was spread over several types of assets in the first place.

Metaplanet Shifts Focus Toward Core Bitcoin Holdings

In addition to this, Metaplanet recently announced a temporary measure. It will put the exercise of some of the stock acquisition rights on hold now. This suspension will be from October 20 to November 17. Consequently, the firm gets a chance to reassess its funding strategy in this temporary freeze. The company wants to be effective in improving flexibility.

Moreover, Metaplanet wants to concentrate resources now in their core Bitcoin reserves. This action is a strategic turn away from high-premium equity issuance. Therefore, the firm is putting its actual digital assets in the limelight. The enormous $17 billion loss is a huge warning for all investors who are retailing around the world.

Ultimately, excessively high equity premiums are effectively exposed by this collapse and its unsustainability. Conversely, short-term market volatility should not discourage all investment at this point. However, the losses show the dangers of overvalued stocks at the moment. Therefore, investors must always pay critical focus on the underlying asset value. This shift in the market indicates a shift back to the principles of basic valuation immediately.

Indeed, industry analysts suggest this is the end of an era. Specifically, the report calls it the end of financial magic for these firms. Consequently, future growth needs to be founded on the value of tangible assets. This will result in increased transparency and safeguarding of all investors. Therefore, attention is diverted to direct, regulated products of Bitcoin.

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