As summer falls into the Northern Hemisphere, the financial dream of Bitcoinization is rapidly becoming a nightmare. The summer of Bitcoin paper, which issues stocks to (extreme) overvalued and ignorant financial markets, ends with buying Bitcoin.
My dream of Bitcoin’s Ministry of Finance was good. I openly admit that it makes some sense.
For months, Wall Street enjoyed the foaming and burned fire. But at last, financial gravity has re-recognised itself. We are all awakened from our summer escape with summer delusions. It’s great and tragic to see standard corporate finance being confirmed again.
Earlier this year, David Bailey, CEO of BTC Inc, owner of Bitcoin Magazine, told Bitcoin for Btc Inc, another division of Btc Inc, “If we can sell a dollar for more than one dollar, we’ll trade all day.”
After all, the free lunch strategy (!) wasn’t free… Cleaning up investor money in the process was a painful journey to learn that lesson.
When you are a retail bag holder and you are buying security instead of actual Bitcoin, you are usually doing so with premium (e.g., one or more MNAV). Awful, this is both validationally insane – why buy a dollar for more than one dollar? – And the very power to animate these Bitcoin finance companies.
We’ve seen this with legitimate criticism and speculated that while Bitcoin’s Fiat price is rising, MNAVS will fall to about 1 as stocks fall and flatten. Fate did the trick on us by crashing the price of Bitcoin instead. As a result, many of these airy financial alchemy monsters have been dropped by much larger multiples.
Bailey’s own Naka, where Bitcoin Magazine offers a specific marketing service, was the most interesting (and financially tragic for many people around these parts). When Naka announced its $5 billion stock issuance program on a massive scale last month, the stock collapsed down around 30% in the news, then continued to 70% down 70% from the first pump on the announcement of reverse marging at KindlyMD. $naka has dropped by a whopping 85% from its May high, recently setting a new low of $3.28.
Market prices are true, and the truth at dusk of the treasury company’s dreamy delusion is that it is not in the promised land to cram into the corporate balance sheet with retail equity and debts to win bitcoin.
“The market price tells you whether you’re right or wrong,” said Moshe Shen, managing director of APAC WinterMute Trading, on the first day of Bitcoin Asia, which recently ended in Hong Kong. I think that speaks well enough of the questionable outlook for Nakamoto and other Bitcoin finance companies.
Bitcoin’s Ministry of Finance’s magic is over
The repeated pump-and-dump effect of issuing more shares for a Bitcoin financial strategy is no longer accompanied by a great pump against the stock price. As sanity and traditional corporate finance suggest, it falls. It doesn’t matter if Saylor’s strategy is eating thousands of coins. MSTR prices continued to fall, and since November last year, the total total has been returned to common shareholders. Metaplanet has recently passed 20,000 coins in a hype celebration, dating back to levels not seen before the paper summer began.
In a recent article documenting the financial phenomenon, Nikou Asgari of the Financial Times said, “The strategy to buy crypto is heavily dependent on the issue of stock or the increase in debt to buy Bitcoin and other tokens. Underestimating the points, she continues, “However, as the company’s valuation drops, it becomes more difficult to raise capital.”
When stock prices fall and MNAV approaches 1, free money magic will disappear. Once the age of magical money printing is over, we’ll look into whether the hundreds of finance companies out there have (something?) viability.
Even another company involving BTC Inc and Nakamoto, Tyler Evans of UTXO Management, confessed in the same FT article as Asgari. The market “overheated irregularly”, and the paper Bitcoin summer was “the peak of hype and number of companies.”
At the end of the paper Bitcoin summer, we see reality reconstructing itself once again, dramatically recovering from the collective delusion that market prices in the world’s most fluid markets can head far beyond the MNAV course.
Here’s a bold prediction: A year later, Bitcoin finance companies will not be an issue. Most of the lower tier do not survive, instead spitting out coins they have been so sniffing and recklessly snipped. Teams with serious moats and competent management teams like Strategy and Metaplanet survive, but MNAV has reduced to a sliver above zero and belongs logically.
The paper Bitcoin summer is over and I couldn’t be more excited to see these nightmares return to the etheric dreamland from where they came.
Source: https://bitcoinmagazine.com/markets/the-end-of-paper-bitcoin-summer
