Editor's PiCK
"Bitmine's valuation losses estimated at $3.7 billion…losses accumulate like compound interest"
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Summary
- Recently, amid the cryptocurrency bear market, 10x Research said that Bitmine's valuation losses amount to about $3.7 billion.
- 10x Research pointed out the structural risk that if a DAT company's net asset value (NAV) falls, losses accumulate like compound interest.
- It also emphasized the divergence between NAV and ETFs, the opaque return structure, and that investor risk can increase if the premium disappears.
Recently, amid the cryptocurrency bear market, analysis has estimated that Bitmine, the world's largest Ethereum (ETH) reserves company, has valuation losses of $3.7 billion (about 5.4 trillion won).
Cryptocurrency analytics firm 10x Research said on the 20th (local time) via its official X account, "(Compared to Bitmine's average purchase price) the Ethereum price has fallen by more than $1,000," adding, "This means a valuation loss of $3.7 billion occurred even before considering the high net asset value (NAV) premium that investors paid."
10x Research pointed out the risks of companies that adopt a Digital Asset Treasury (DAT) strategy. 10x Research said, "(When a DAT company's) net asset value rises, 'existing' shareholders benefit, but if NAV falls, losses have a structural characteristic of accumulating like compound interest," noting, "This is a risk that DAT company investors often underestimate."
10x Research emphasized, "Unlike exchange-traded funds (ETFs), DAT companies have a very large divergence from NAV." 10x Research said, "(A DAT company's) returns are more complex and opaque than the underlying asset price of cryptocurrencies, and a hedge-fund-style fee structure is layered on top, which can erode returns in the long term," adding, "If the premium eventually converges to zero, investors will structurally fall into a 'glamorous but inescapable trap (Hotel California).'"
