Galaxy Digital CEO: Only Crypto Treasuries With Real Products Will Thrive

Key Insights:

• Galaxy Digital CEO says the model that once worked for crypto treasuries like Strategy, BitMine, and a few others will not succeed for most.
• According to him, the only path forward for treasuries outside of Strategy or BitMine is to become real companies. Offer tangible products and services.
• Treasuries that rely solely on holding crypto face a stark choice to evolve into conventional businesses with clear revenue models.

Crypto treasury companies must build sustainable business models and products to thrive, said Galaxy Digital CEO Mike Novogratz while on a podcast with investor Anthony Scaramucci.

For Novogratz, the only path forward for treasuries outside of Strategy or BitMine is to become real companies with tangible products and services. Simply holding crypto no longer creates shareholder value. As such, management needs to transform treasuries into businesses that generate revenue, he added.

Galaxy Digital CEO Says Crypto Treasuries Will Need More Business Than Just HODL

According to Novogratz, a rough 40% of Bitcoin treasuries’ stocks trade below their holdings’ value. Apparently, it is the metric that once let them access capital markets and buy more coins. Over 60% of them also purchased Bitcoin at prices far above today’s levels. That left many companies sitting on significant unrealized losses.

Same story for Ethereum treasuries. Most have stopped buying, with the exception of Tom Lee’s BitMine. It continues to add Ether weekly and now holds over half of the $21 billion sector. With crypto ETFs offering direct exposure, investors no longer need to pay premiums for treasury-wrapped assets.

Galaxy Digital CEO said the model that once worked for Strategy, BitMine, and a few others will not succeed for most. Companies can pivot to conventional businesses with real revenue streams. If not, they can slowly fade as discount vehicles, trading far below their net asset value.

Ethereum treasuries have mostly stopped buying, bringing their shopping sprees to an end. The exception is Tom Lee’s BitMine, which continues to acquire Ether weekly and now holds over half of all Ether in the $21 billion sector. Meanwhile, Ethereum’s price remains roughly where it was in 2021, showing little growth for other treasury players.

According to Mike Novogratz, the approach that succeeded for Strategy, BitMine, and, to a lesser extent, Joe Lubin, no longer works for most companies. Treasuries that rely solely on holding crypto face a stark choice. They must evolve into conventional businesses with clear revenue models, abandoning the pure-play treasury strategy, or risk a slow decline, trading at steep discounts of 70 to 80 cents on the dollar.

50% of Bitcoin Treasury Stocks Slide Below NAV

The Galaxy Digital CEO admitted that he, like many investors, got caught up in the treasury boom.  What started as a rush to buy quickly turned into a sharp slowdown.

Bitcoin and Ethereum ETFs now provide investors with direct exposure to crypto, removing the need to pay extra for treasury-wrapped shares. Many companies that relied on hype and stock price gains, following the Strategy model, are struggling to justify their valuations.

Net Asset Value (NAV) Explains Why – Galaxy Digital CEO

NAV shows how much equity investors are paying for every dollar of crypto a company holds. Shares trading above NAV are at a premium, while shares trading below are at a discount. Today, nearly half of all Bitcoin treasuries trade below NAV, and there is no clear bottom in sight.

This combination of structural challenges and overreliance on investor enthusiasm has left much of the Bitcoin treasury space at steep discounts. Companies can no longer depend on hype alone. They must find new ways to create real shareholder value or risk continuing their slide.

Saylor’s firm, Strategy, has seen its stock rise nearly tenfold since launching its treasury approach in August 2020. Many other companies tried to replicate that success, but few managed to pull it off.

According to Mike Novogratz, only three out of fifty treasury companies successfully executed the model. The rest are left struggling, trying to recover lost ground. Even Strategy itself has seen its stock fall more than 50 percent over the past six months.

When asked how he would handle a distressed treasury, the Galaxy Digital CEO said he would first buy back discounted stock to reduce the gap between the share price and net asset value.

He would also leverage the team’s skills to build sustainable revenue for the business. The goal, he said, is to move beyond simply holding crypto and instead build a business that produces tangible value for shareholders.