Brutkey

A report by blockchain firm Galaxy Digital warns of structural risks from the proliferation of such companies: “When hundreds of firms adopt the same one-directional trade (raise equity, buy crypto, repeat), it can become structurally fragile. A downturn in any of these three variables (investor sentiment, crypto prices, and capital markets liquidity) can start to unravel the rest.” Though the report describes the risk as “largely theoretical” (“for now”), it compares the potential spiral to the 1920s investment trust crash:35 Trusts traded at premiums to NAV, issued shares, and used the proceeds to buy more assets. When sentiment turned, those same mechanics amplified the downside. Collapsing premiums choked off access to capital while leverage magnified losses on falling assets. These cascading failures were an accelerant of the 1929 crash and subsequent Great Depression. [Digital Asset Treasury Companies] may be more transparent and better regulated than 1920s trusts, but the mechanics of mNAV-driven capital formation are eerily similar.
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A report by blockchain firm Galaxy Digital warns of structural risks from the proliferation of such companies: “When hundreds of firms adopt the same one-directional trade (raise equity, buy crypto, repeat), it can become structurally fragile. A downturn in any of these three variables (investor sentiment, crypto prices, and capital markets liquidity) can start to unravel the rest.” Though the report describes the risk as “largely theoretical” (“for now”), it compares the potential spiral to the 1920s investment trust crash:35 Trusts traded at premiums to NAV, issued shares, and used the proceeds to buy more assets. When sentiment turned, those same mechanics amplified the downside. Collapsing premiums choked off access to capital while leverage magnified losses on falling assets. These cascading failures were an accelerant of the 1929 crash and subsequent Great Depression. [Digital Asset Treasury Companies] may be more transparent and better regulated than 1920s trusts, but the mechanics of mNAV-driven capital formation are eerily similar.
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