Author: Timothée

Compiled by: TechFlow

“I’ll make him an offer he can’t refuse.” — Altcoin Crypto Treasury Reserve offers discounted mNAV entry to PIPE investors, unlocking it soon.

How to Invest in Crypto Treasury Reserve (or Not).

The current DAT (cryptocurrency treasury reserve) market will be driven by Alt DATs (altcoin treasury reserve companies) issued through PIPEs by Q4. These altcoin treasury reserve companies are the fastest to market and have an immediate impact on the scale of the underlying tokens. Currently, the BTC and ETH markets are saturated, while SOL is about to reach a critical juncture. Altcoins are on the rise.

TL;DR

1. Key Elements of Crypto Treasury Reserve Companies -> See Detailed Bank Comparison Chart
2. Bonus question -> Ask yourself, who is the ultimate owner?
3. FUD around Crypto Treasury Reserves -> Some concerns are legitimate, most are not, do your own research (DYOR) and read the relevant documents!
4. Q4 Outlook -> After the press conference, the real winners will emerge

If you are building a project in this space, please PM me.

Why are altcoin crypto treasury companies doing DAT? The reason is simple:

1. New listing method: no longer Binance, but NASDAQ!
2. Buyback + Destruction… but monetization is possible!

Here is some data I collected on altcoin crypto treasury reserve companies, omitting the following:

• Some Alt SPACs (Deep Tide Note: A special purpose acquisition company for altcoins, also known as a "blank check company." This is a publicly traded shell company created for the purpose of acquiring or merging with an existing company), such as $TLGY (the stock symbol of the SPAC company serving the $ENA project, "TLGY Acquisition Corporation") and $ETHM (the stock symbol of the SPAC company serving $ETH-related businesses, "The Ether Machine"), are expected to go live by the end of the year. Although I am bullish on $TLGY, these projects will not be able to use funds until they complete deSPAC (Deep Tide Note: refers to the process of SPAC completing the merger with the target company. This is a key stage in the SPAC life cycle, marking the transition from a "blank check company" to a company with actual business operations) by the end of the year, and there is no point in promoting media publicity before then.
• Increase the number of publicly traded operating companies with a BTC strategy, as they are not pure-play crypto projects. These companies (e.g. $SMLR) may trade at a premium in Q3 2024-Q3 2025, but I believe they will trade at a discount to net asset value (NAV) per share over the long term as investors have more and better options to express exposure to the market.
• Crypto Treasury Reserve Companies that use ELOCs (equity revolving credits) instead of PIPEs (no immediate cash flow).

If you find any inaccuracies, please PM me and I will update the content.

Key things to note

• RDO (Rapid Unlock): The unregistered portion will unlock after the registration becomes effective, which is expected to take 30-45 days, but if the PIPE portion is completed in-kind, a NASDAQ shareholder vote may now be required (specific guidance pending).
• Pre-Funding Warrants: Often used to avoid exceeding a certain ownership threshold to meet reporting requirements.
• Warrants as an inducement: While warrants are often used as an investment sweetener, they help DATs lock in future financing prices to prevent mNAV from turning into a discount.
• PIPE Investor Behavior: It can be assumed that 99% of PIPE investors will sell upon unlock.
• Massive fundraising strategies: Some players achieve WKSI (Widely Known Issuer) status through massive fundraising and high float, allowing them to immediately launch an ATM (self-service public offering) and monetize the premium (we’ve seen this strategy with $BMNR, $SBET, and potentially $OCTO).

• Importance of structure: Focus on the net asset value (NAV) price per share and whether there is future overhang from warrants etc.
• Pay attention to how much a crypto treasury reserve company spends on banking fees. Currently, crypto treasury reserve companies with less than $100 million often pay excessive fees during their initial launch. Bank performance varies, with some banks specializing in branding, others in structuring, and still others in finding shell companies.

Additional data needed in the future/Questions to ask during due diligence:

• Key Spokespersons (Attention Return): Who can drive market attention? Distributing content is important, but telling a good story is equally crucial. While not everyone can be an industry leader like Tom Lee (@fundstrat), you don't need a spokesperson of that caliber to drive grassroots development. For example, $BONK's crypto treasury reserve company $SHOT has a core contributor named @theonlynom.

Ideally, the spokesperson should be frequently in the news, such as on Bloomberg.

• Treasury Management: How much are the crypto treasury reserve companies spending, and are they a drag on cash flow?
• Liquidity: The percentage of circulating supply and trading volume to the funding size.
• Buying pressure: Net new capital raised as a percentage of the token’s circulating market capitalization — how much is too much? How much is meaningful enough? 10%? 20%?
• Target Company’s Business: Does the target company have contingent liabilities or long-term risks before the Crypto Treasury Reserve Company completely divests its traditional business?
• Foundation Involvement: Is the crypto treasury reserve company backed by a foundation, or is it just one of many?
• Buybacks: Did the crypto treasury reserve use some of the proceeds for defensive buybacks? Did it raise warrants or convertible bonds to establish a separate pool of funds?
• Future Strategy: If a crypto treasury reserve company raises funds through a PIPE in one go, it's simply a one-time cash grab. Pay attention to proactive communication from the target company or new team (or foundation). This isn't the cryptocurrency world; there are real-world consequences.
• PR/IR for Retail Investors: If crypto treasury reserves prioritize data over narrative, their strategy is flawed. Check their tweets—who do you think is writing them? Who is the target audience? Altcoin treasury reserves first need to build awareness among retail investors.

Key concerns (FUD) and countermeasures

• mNAV is compressing! -> Yes, this is true for crypto treasury reserves that can't compete for market dominance. For example, in the case of ETH, mNAV is compressing due to excessive ATM dilution and overall market dynamics. But you should ask yourself, can a particular crypto treasury reserve increase its per-share value over a few months, rather than holding spot? If the answer is yes, then this discounted mNAV is your opportunity. Not all crypto treasury reserves are created equal; each sector (e.g., BTC/ETH/SOL and altcoins) should have a top winner, determined by their ability to tell a compelling story.
• This is a Ponzi scheme! -> We haven't seen rampant leverage among these crypto treasury reserves yet, as most are funded through equity. If leverage does occur, it won't have a wild ripple effect, but rather a broader market slowdown, like indigestion. Less efficient crypto treasury reserves may need to sell tokens to buy back shares, putting some pressure on token prices.
• They're selling to retail investors! -> You have to believe NASDAQ has stricter listing requirements. Companies that lock up tokens in physical form won't fare well. The market has noticed this (thanks for your attention!), and I believe the market will be the arbiter of price at listing time.

My outlook for the fourth quarter

• The BTC/ETH/SOL market has basically been laid out, and unless they are regional projects, there will not be many new competitors entering the market.
• We may see a small number of top 50 crypto treasury reserves backed by foundations, with an estimated total fundraising size of approximately $250 million including in-kind contributions.
• The compression of mNAV and the potential disincentive to in-kind contributions means that traditional VCs may no longer participate in these deals, so funding may dry up. This also means that the price of shell companies may fall.
• Structure is crucial — we will soon see whether the Crypto Treasury Reserve launched in July/August can lay the foundation for long-term success in Q4 by gaining meaningful media attention and effectively operating its capital structure after unlocking.
• I’m not optimistic about SPACs unless you have a stellar team and a very differentiated story. You can look at the development of the ETH crypto treasury reserve company space, such as $BMNR’s leading performance, and assume that BTC projects will be similar - if you choose to challenge the king (such as $MSTR), you must guarantee success.
• I still believe crypto treasury reserves are a net positive for the crypto industry, as long as they can raise net new capital from the equity markets and use it to fuel the flywheel effect of their own ecosystems.