00:00 Josh
Bitcoin’s downturn this year has also weighed on digital asset finance companies. Yahoo Finance’s Ines Ferre fills us in on the details now. Ines.
00:11 Ines
Yes, Josh, there are over 180 digital asset finance companies. These companies hold cryptocurrencies on their balance sheets. A lot of these are copycats of that strategy, uh, playbook, uh, Michael Saylor’s strategy, which is really a pioneer for these types of companies as they started adding Bitcoin to their balance sheets back in 2020. But as Bitcoin, Ethereum and other tokens have come under pressure over the past few months, the stocks have taken a hit. Well, Wall Street or investors will pay attention to an indicator called MNAV. This is a multiple of net asset value. This is basically market capitalization compared to asset value. When MNAV is below 1, it means investors value a financial company less than the cryptocurrency on its balance sheet. So in November, when you see the MNAV of the strategy, uh, approaching 1, you’re going to see quite a bit of pressure on the stock. Now, uh, the strategy kind of resists that valuation, basically saying, look, we’re an operating company, we have Bitcoin-backed securities, you shouldn’t value us at this MNAV. Basically, this is what most digital asset finance companies say. I did speak to one fund that has looked at over 100 of these companies in the last year, and they said they had invested in about 12 of them. They’re basically comparing what was happening in the Dat space to the dot-com era, where companies would put a .com on their name, so they were a .com company, and they would be profitable, and so on. But the resistance is like, you know, are you an operating company as well? Are you driving cash flow? That’s really going to be the difference between the winners and the losers because as one strategist said, uh, the industry is entering a Darwinian phase where, uh, the companies with the strongest balance sheets or the companies that survive this crypto winter are going to be the ones that, uh, emerge from everything that’s going on in the industry right now, Josh, as we’re seeing depressed prices for these cryptocurrencies.
02:20 Josh
Okay, like, thank you. Appreciate it.