Important points
- Digital asset vaults are companies that hold cryptocurrencies on their balance sheets, often trading at a discount.
- M NAV is a metric for evaluating companies relative to their virtual currency holdings.
- The decline in crypto prices has had a significant impact on M NAV, raising questions about equilibrium.
- Discounts in the NAV of cryptocurrency companies present potential investment opportunities.
- Private credit models do not have a mechanism to eliminate discounts like ETFs.
- Ethereum’s staking feature makes it a highly productive asset compared to Bitcoin.
- Share buybacks are often insufficient to combat inflation and debt dilution.
- The cryptocurrency industry is facing an identity crisis as traditional finance adopts on-chain technology.
- The future of cryptocurrencies may require adapting to a broader audience beyond crypto natives.
- The current cycle lacks large-scale wealth creation events that influence market dynamics.
- Incentivizing early users with high yields is unsustainable.
- The DeFi Vola strategy may appeal to users looking for benefits without the risk.
- The next wave of crypto users will likely come from those who value the technology but are not engaged.
- The future of cryptocurrencies may resemble cloud computing in its evolution.
- With the introduction of technology, the four-year cycle in the cryptocurrency market may become obsolete.
Guest introduction
The guests featured on Unchained are prominent figures in the cryptocurrency industry, providing insight into the evolving landscape of digital assets and market dynamics. With extensive experience in analyzing the crypto market, our guests will provide a unique perspective on the challenges and opportunities facing crypto companies today. This episode delves into the intricacies of digital assets, market valuation, and the impact of traditional finance with on-chain technology, making it a must-listen for anyone interested in the future of cryptocurrencies.
Understand your digital asset vault
- Digital asset vaults (DATs) are companies that stockpile cryptocurrencies such as Bitcoin and Ethereum.
DAT stands for Digital Asset Treasury…Many of these companies are copycats following the Michael Saylor strategy.
— Steve Erlich
- Many DATs trade at deep discounts compared to their crypto holdings.
Safe stocks of many digital assets…are trading at even deeper discounts.
— Steve Erlich
- Market sentiment is cautious and opinions are divided on investing in DAT.
Some investors think it’s now the time to buy, others say not so soon.
— Steve Erlich
- Understanding DAT is important for understanding current market trends.
- DAT’s valuation discrepancy highlights a potential investment opportunity.
M NAV and market trend evaluation
- M NAV evaluates the value of a company by comparing it with the virtual currencies it owns.
M NAV is an abbreviation for net asset value, which quantifies how much investors value a company.
— Guest name
- Due to the recent decline in cryptocurrency prices, M NAV has declined across the board.
Their M NAV is almost universally below 1.
— Guest name
- Questions arise about the natural equilibrium of M NAV.
What is the natural equilibrium of M NAV for this type of company?
— Guest name
- Trading at a discount can be a value play for investors.
- Understanding M NAV is essential to evaluating the valuation of a cryptocurrency company.
Impact of market discount on NAV
- There are significant discounts to the NAV of companies that hold virtual currencies.
The company…its NAV is somewhere…it’s trading at 5 points.
— Jack Mallards
- Although the stock price may fluctuate slightly, it should roughly match the base price.
It should be about 1 plus or minus a few percentage points.
— Jack Mallards
- Understanding NAV is important for valuing a cryptocurrency company’s stock price.
- NAV discounts present potential opportunities for investors.
- The relationship between stock prices and virtual currency holdings is the key to market trends.
- NAV provides insight into the financial health of a cryptocurrency company.
Private credit model and the role of ETFs
- Private credit models and closed-end funds do not have the arbitrage mechanisms of ETFs.
If you compare it to the private credit model…there is not quite the same mechanism.
— Guest name
- Ethereum is highly productive with staking and generates passive yield.
Ethereum…Ether is considered a productive asset because it can be staked.
— Guest name
- Once market conditions calm down, market NAV should stabilize around 1.
The M NAV of these companies should be around 1.
— Guest name
- GBTC provides accredited investors with regulated exposure to cryptocurrencies.
- Understanding these models is important to evaluating your investment strategy.
Future of Bitcoin and Ethereum prices
- Converting a trust to an ETF eliminates the need for discounts and premiums.
ETFs work…arbitrage away discounts and premiums.
— Guest name
- Bitcoin and Ethereum prices are unpredictable and can fluctuate.
It’s really hard to tell…you can’t tell if the bottom is in or not.
— Guest name
- Investors should be careful about assuming historical discount patterns will repeat.
There are reasons to be very cautious about this.
— Guest name
- Understanding how ETFs work is extremely important in understanding market price trends.
- The unpredictability of the cryptocurrency market is an important insight for investors.
Limits on share buybacks
- Stock buybacks often fail to combat inflation and debt dilution.
Share buybacks…are not large enough to cause any meaningful damage.
— Steve
- Many companies announce large share buyback programs but never implement them.
We announced a $1.5 billion buyback program…but we don’t have any buybacks coming close to that.
— Steve
- Investors should be cautious in interpreting share buyback announcements.
Investors should pay close attention to share repurchase programs.
— Steve
- It is important to understand the limits on share buybacks to assess financial health.
- The discrepancy between announcement and implementation highlights market challenges.
A strategic approach to stock price recovery
- In the long term, companies need a strategic approach to reverse stock price declines.
It’s going to be very difficult… you’ll need patience in the end.
— Guest name
- Investors should focus on high-conviction bets rather than tactical trades.
Buy and hold…be strategic rather than tactical.
— Guest name
- Some companies are at risk of being delisted due to stock price movements.
At risk of delisting…Stocks are trading below $1.
— Guest name
- Understanding strategic investment approaches is critical to long-term success.
- Being aware of delisting risk is essential to monitoring stock performance.
Identity Crisis in the Cryptocurrency Industry
- Cryptocurrencies are facing an identity crisis as traditional finance adopts on-chain technology.
Non-crypto native entities…taking over what we thought we could win.
— Dougie DeLuca
- There is a growing consensus about the uncertain future of cryptocurrencies.
Many people clearly think to themselves.
— Dougie DeLuca
- Unless the industry adapts, it risks leaving crypto natives behind.
Crypto natives will be largely left behind unless we choose to react.
— Guest name
- Understanding the industry’s identity crisis is critical to future growth.
- Adapting to a wider audience is essential to achieving mass adoption.
Evolution of marketing strategies in cryptocurrencies
- Early-stage companies leverage social media in their go-to-market strategies.
A big part of their market development is TikTok and Instagram.
— Guest name
- Labeling your product Crypto or Web3 can turn potential users away.
Cryptocurrency becomes a burden…people get scared and lose trust.
— Guest name
- The focus should shift to demonstrating how the technology improves the user experience.
Let’s focus on what technology actually unlocks for people.
— Guest name
- Companies like Coinbase and Stripe are poised for adoption.
- Understanding the evolution of marketing is critical to your user engagement strategy.
The future of cryptocurrencies and user engagement
- The future of cryptocurrencies may resemble cloud computing in its evolution.
People will build the application…because of the unlocks it provides.
— Guest name
- Success will depend on users being able to engage without having to be “crypto natives”.
Build a chain without thinking of being a cryptocurrency native.
— Guest name
- Layer 1 networks can enable innovation rather than focus.
Is the future of some of these L’s for someone else to innovate on top of them?
— Guest name
- Understanding the evolution of user engagement is critical to mainstream adoption.
- A comparison with cloud computing provides a framework for the future of cryptocurrencies.
