The Breakdown - Crypto Treasuries Face Their First Real Test

Episode Date: July 31, 2025

Crypto treasury companies like Bitmine and Backed are under pressure as investor enthusiasm wanes. Bitmine’s share buyback failed to move markets, raising concerns about narrative exhaustion despite bullish projections and backing from major crypto firms. Meanwhile, Backed’s discounted public offering cratered its stock, and Tether-backed 21 Capital ramps up ahead of listing. NLW explores whether the crypto treasury trend is stalling—and what it means for the broader market. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, July 30th, and today we are talking crypto treasuries. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.L.Y slash breakdown pod. All right, friends, back with another breakdown today. We are deep in the trenches of obviously the big theme of the moment, which is these

crypto treasury companies. Although with Tom Lee's bitmine announcing a share repurchase plan, some are wondering if it's a sign that the narrative is sputtering. And Lord knows, there is no industry on the planet that can chomp through a narrative faster than this one. Fundstratt analyst in crypto hyperbole Tom Lee announced his ETH Treasury strategy play at the end of last month. It followed the usual playbook, with the shell,

company stock price moaning by 35x on the announcement and issuing equity to buy ETH. That initial price pop faded quickly and the stock crashed by 75% the following week. It's been trending down for the entire two weeks since. Bitmine has acquired $2.4 billion in ETH, holds around $23 million in Bitcoin from their mining business, and has about $400 million in cash. The stock is currently trading at around $33 and has $22 in cash and crypto on their balance sheet, so the NAV premium is only 50%. For comparison, micro-strategy only saw a nav premium that low during the crypto winter, and briefly during the beginning of 2024. And each time, it was a signal that they needed to stop issuing shares. At first glance, then, it's understandable why some people think this looks like

narrative exhaustion. Bitmine is currently the largest Ethereum treasury play, but they're looking to hold attention in an increasingly crowded market. What's really notable is that the buyback announcement didn't pump the stock. Bitmine said they would be purchasing up to a billion dollars of their own shares, roughly a quarter of their current market cap. The stock was down almost 9% yesterday following the announcement. In the background, Bitmine filed for their private investment on lock on Tuesday night ahead of the buyback announcement. The investors in the $250 million pipe will get access to their stock at the beginning of October. Now, they bought in at a $4.5 price, so they're currently looking at a 7x without breaking a sweat. A big part of the plan so far has

been to put Chairman Tom Lee front and center with his incredibly bullish views. On Monday, the company launched what they're calling the chairman's message, monthly series intended to present the company's longer-term crypto plan. The first edition of the YouTube series disclosed a goal of acquiring 5% of all eth supply, some 23 billion at current prices. They even gave this goal a catchy slogan, the alchemy of 5%. The company also said that they aimed to establish a Made in America validator network with all infrastructure located onshore. But the centerpiece was a sky-high price target of 60,000 eth. To get this figure, Bitmine estimated the total value of every Wall Street firm and every payments network, claiming the Ethereum network could replace

all of it and therefore should be valued that way. They attributed a $7 trillion valuation to ETH, 18 times higher than the current market cap. The company was, of course, careful to disclaim the modeling entirely saying it was for illustrative purposes and purely hypothetical. Now, I am not meaning to cast any aspersions on what Lee or Bitmine are doing here. The story could still end well. Micro Strategy and Microplanet also had a rough start as they struggled to reach escape velocity. There are also still some very strong backers coming in for a piece of Bitmine at these levels. Founders Fund disclosed the 9% stake. in the company two weeks ago, and the pipe investors are a laundry list of prominent crypto firms like

Cracken, Galaxy Digital, and DCG. Kathy Woods' arc is doubling down on their pipe investment, buying the dip with $35 million over the past two days. In general, these crypto treasury companies are taking some of the VC games we've seen in the crypto market and transferring them to the stock market. Bitmine in particular had an extremely low float when they announced their crypto strategy, helping them achieve the massive pop on the first week. To many, any of the aggressive marketing tactics don't matter as long as the strategies are delivering for shareholders. And I think it's fair to say that at this point, while micro strategy and Metaplanet have their flywheels humming, BitMine is still trying to get to that phase. And that, I think, is why this news failure on the buyback announcement matters.

It was clearly done in part to provide some assurance to the market. We haven't seen a crypto treasury company of this size drop below a 1.5 times now multiple in the past two years. So there isn't an expectation of what they will do. It makes sense to aggressively buyback stock to try to boost the stock price, but the issue will be if the actual buybacks can't get the price back up. Once the nav premium drops this low, the company can't really issue new shares. They can issue debt, but at that stage, the terms are likely to be unattractive. Point being, a low and falling nav multiple is the doom loop for crypto treasury companies. Currently, Bitmine has around $400 million in cash, so they don't have the funds to carry out

the billion dollars in buybacks that they announced. Now, given that the buybacks are intended to happen from time to time, that's not a big deal necessarily. However, it does mean that they might need to keep some cash and reserve for buybacks rather than going all out on Ethereum purchases. All the announcement really does for now is to signal to the market well in advance what they intend to do to stave off that doom loop. Still, it feels telling that they're in a position where they already need to assure the market that they'll defend a price floor. I'm loath to draw this comparison because it really is not nearly as extreme, but some are getting echoes of Doquan's LFG fund that supposedly had a billion dollars worth of Bitcoin

to defend the Terra Luna peg. Again, there is nothing in Bitmines financial engineering that's anywhere near as Ponzi-like as Luna's, but to some, that defensiveness is an echo. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversified to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of tradfi and crypto, and one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course,

investing involves risk, including possible loss of principle. For more information and important disclosures, visitgrayscale.com. Go to Grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. Ultimately, I think people are looking at this as a bellwether. It's going to be difficult for crypto treasury companies to make it if retail enthusiasm is already ebbing away. At the moment, it looks like Tom Lee's bullish calls can't pump Bitmine. Now, of course, it's entirely possible that this is nothing more than a big share unlock on the horizon. We know how those go in crypto markets and it's probably no different here in

stockland. Could be that once that fear is sorted out and investors take whatever liquidity they're going to take, Bitmine might go right back on its merry way to 5%. Still, the narrative violation is raising a few eyebrows. To many, crypto treasury companies are the current leading candidate for what could end this cycle. If a major altcoin project had dumped on an announcement like this, we'd all be sitting up and paying attention. Maybe the same isn't true for treasury companies. Most people are humble enough at this moment to not really know what anything means, but it's certainly not the news that Bitmine or the treasury industry in general would have liked to see. Maybe we'll try to cover a bunch of

less than thrilling news altogether. Crypto brokerage-backed stock price has cratered on the announcement of a paltry public offering. Last month, backed announced that they were looking to raise a billion dollars in debt and equity to fund a Bitcoin Treasury strategy. Late on Monday night, they announced a public share, aiming to raise just $75 million. The stock was sold at $10 a share, 40% lower than where it closed on Monday afternoon. Investors were also given warrants to purchase further stock at the same price within the next 30 days. The chart looked kind of like a meme coin, going from 14 to 25, then round-tripping through the course of this month before dumping 40% in a straight line down. The Bitcoin Treasury narrative doesn't seem to have helped once the numbers were there

in black and white. Lazzarillo wrote, they were raising a billion but had to sell their stock at a 60% discount to raise 75, so stock nuke 60% in two days? Now how do they raise more money? Parenthood capital simply quipped, backed should be renamed, wrecked. Now, it's important to note that BACT has had a ton of problems this year, so this is definitely not purely about a narrative failure of the Bitcoin treasury narrative. It was reported in May that Weble had canceled their infrastructure and custody contract with BACT in favor of switching to Coinbase. And given that that contract represented 75% of their company's revenue, obviously there's a bit of their back against the wall. Still, the weak

public offering suggests the fundraising environment just isn't there for an infinite expansion of the Bitcoin treasury play. Although the counterpoint is that the market sending signals now that not everything that has treasury in the strategy is going to be a moon play might not be bad for the sustainability of the whole space. Meanwhile, Tether is topping up their Bitcoin Treasury company ahead of its public listing. 21 Capital announced that Tether will contribute another 5,800 Bitcoin to the treasury vehicle that brings their total holdings to 43,500 Bitcoin, around $5.1 billion worth and more than their initial target. That's good enough to be the third largest corporate Bitcoin holder behind Micro Strategy and Marathon Digital. 21 is still awaiting

their public listing via a SPAC deal with Cantor Equity Partners. Stock in the Shell Company is already rocketing in anticipation, but it means that 21 is yet to start issuing equity in debt to start their Bitcoin accumulation flywheel. So far, the only contributions have been in-kind Bitcoin from Tether, BitFinex, and SoftBank in exchange for stock. Jack Mahler's the chairman of the company updated the holdings in a Twitter post, but didn't elaborate on when the public listing was expected. During this week's press tour, he told Bloomberg that the plan wasn't just to carry out the micro-strategy playbook, but to build Bitcoin financial products as well. Lastly, today, E. Toro is joining the trend in offering tokenized stocks. The exchange announced

that they will soon launch over 100 tokenized securities on Ethereum, including major U.S. stocks and ETFs. The tokens will be tradable on E. Toro's platform, but they intend to allow users to withdraw them to self-custody and use them in D-Fi protocols as well. CEO Yoni Asiyah said, tokenization removes boundaries, providing transparency and control. It has the potential to democratize finance, making assets more accessible to more people. He commented that new regulations like the Genius Act in the U.S. and Mika in the EU make, quote, tokenization of real-world assets a new opportunity to create digital assets that are legally backed and regulated. Now, neither of those laws actually deal with tokenized stocks.

So far, the only comment from the SEC has been Commissioner Hester Purse saying that security's laws still apply, implying that some of these tokenization designs are under scrutiny. Eitoro's offering is currently live in Europe and they plan to make these tokens available more broadly over time. From the press release, it sounds like these tokens will be issued on the Ethereum Mainnet, but presumably Eatoro will choose a layer two deployment over time to increase speed and reduce cost. While the last month has been big on announcements, it looks like relatively few tokenized stocks have actually been issued. We're a month out from Robin Hood's announcement, and while it looks like the product is live in Europe, we have no data on it.

RWA.xyZ shows that somewhere in the order of 40 million in tokenized stock have been issued by X stocks, which is the consortium offering from Cracken and Bybit. Basically, interest might be growing fast, but the actual dispersion of this trend is still very, very nascent. That's however going to do it for today's breakdown. Appreciate you listening, as always. And until next time, be safe and take care of each other. Peace.