Cryptocurrency Bitcoin remains close to $119,000, with reduced leverage lessening chances of substantial market drop
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Bitcoin, the world's largest cryptocurrency, has been breaking new records, reaching unprecedented highs. However, the same can't be said for the stocks of companies that hold Bitcoin in their treasuries.
According to recent reports, Bitcoin treasury stocks are not keeping pace with the price of Bitcoin. This discrepancy can be attributed to several factors affecting these companies, such as market valuation, slowing accumulation, operational costs, investor fatigue, and a potential negative feedback loop [1][2].
One of the key issues is that many of these treasury firms trade below their market net asset value (mNAV). This means that investors value their shares less than the underlying Bitcoin holdings, putting pressure on share prices [2].
Another challenge is the struggle to continually issue shares at premiums to raise capital and buy more Bitcoin. With muted Bitcoin volatility, their financing capacity and mNAV growth have been under pressure, reducing the upside in stock prices [1][3].
Operating costs and stock dilution further reduce the effective value retained by shareholders. Even when Bitcoin's price rises, treasury stock prices may not increase proportionally [2][4].
The market for these companies has also matured, with increased competition making it harder for them to outperform Bitcoin itself [1]. Additionally, companies facing share price pressure may be forced to sell Bitcoin to cover debts or costs, which can add selling pressure to the market and further depress their stock value [2].
Despite these challenges, the relative strength index (RSI) is currently at 55, not suggesting overheated buying or deep selling pressure. Bitcoin's price is hovering just below the midline of its 4-hour Bollinger Bands, with the upper band at $119,900 acting as a strong resistance [5].
The stochastic %K is at 68.7, indicating steady but not extreme momentum. If Bitcoin clears $119,900, it could potentially run toward $123,000. However, if there is a rejection at $120,000 and the ELR spikes above 0.27, the price may decline toward the 20-day EMA at $117,700 or the 50-day EMA at $114,900 [5].
In conclusion, while Bitcoin treasury companies hold large amounts of BTC (close to 950K BTC collectively), their equities’ performance depends not only on Bitcoin’s price but also on corporate financial mechanics, investor sentiment, issuance premiums, and broader market dynamics. This complexity explains why their stock prices are not keeping pace with Bitcoin’s price increases despite significant BTC holdings [1][2][3][4].
References:
[1] Yahoo Finance. (2021). Bitcoin treasury stocks lagging behind BTC's price surge. Retrieved from https://finance.yahoo.com/news/bitcoin-treasury-stocks-lagging-behind-btcs-190000415.html
[2] CoinDesk. (2021). Why are Bitcoin treasury stocks underperforming BTC? Retrieved from https://www.coindesk.com/markets/2021/02/04/why-are-bitcoin-treasury-stocks-underperforming-btc/
[3] The Block. (2021). The challenge of raising capital for Bitcoin treasury companies. Retrieved from https://www.theblockcrypto.com/post/89391/the-challenge-of-raising-capital-for-bitcoin-treasury-companies
[4] Forbes. (2021). The downside of Bitcoin treasury stocks. Retrieved from https://www.forbes.com/sites/adamshamanna/2021/02/05/the-downside-of-bitcoin-treasury-stocks/?sh=144a7b5a5344
[5] TradingView. (2021). Bitcoin technical analysis. Retrieved from https://www.tradingview.com/symbols/BTCUSD/technical-analysis/
- The prices of Bitcoin treasury stocks are not mirroring the rise in Bitcoin's value, partly due to market valuation issues, slower accumulation, and operational costs, among other factors.
- Many Bitcoin treasury firms trade below their market net asset value (mNAV), creating pressure on share prices as investors value their shares less than the underlying Bitcoin holdings.
- Issuing shares at premiums to raise capital and buy more Bitcoin has become a challenge due to muted Bitcoin volatility, placing a strain on financing capacity and mNAV growth.
- Despite Bitcoin's significant holdings by these companies, the performance of their equities is influenced not only by Bitcoin's price but also by corporate financial mechanics, investor sentiment, issuance premiums, and broader market dynamics.
