Evernorth's XRP Losses Highlight Challenges for Digital Asset Treasury Companies

The recent downturn in cryptocurrency values has significantly impacted various assets, including prominent ones like Bitcoin. This trend was recently analyzed by CryptoQuant, a leading on-chain data firm, which highlighted the precarious situation facing XRP-focused treasury company, Evernorth, as an example of the risks associated with this sector.

Key Takeaways

Evernorth is facing $78 million in unrealized losses from its XRP acquisition.
Strategy (MSTR) shares have fallen over 26% amidst the broader crypto market downturn, though it retains unrealized gains in Bitcoin.
BitMine has approximately $2.1 billion in unrealized losses due to declining Ether prices.
Digital asset treasury companies (DATs) are experiencing growing valuation pressures, drawing parallels to the dot-com bubble.
Analysts suggest that only the strongest companies in this sector may survive the ongoing market challenges.

Evernorth has reported unrealized losses amounting to approximately $78 million on its XRP investment, just weeks after its acquisition. The declines have also affected shares of Strategy (MSTR), a major player in Bitcoin investment, which has seen its stock plummet by over 26% in the past month, correlating with Bitcoin's price drop, as indicated by Google Finance data. It's worth noting that Strategy still maintains a significant unrealized gain with an average purchase cost of about $74,000 per BTC, according to BitcoinTreasuries.NET.

Source: CryptoQuant

Simultaneously, BitMine, recognized as the largest holder of Ether, is confronting around $2.1 billion in unrealized losses linked to its Ether holdings, as reported by CryptoQuant. BitMine holds nearly 3.4 million ETH, having acquired more than 565,000 over the previous month based on industry data.

The Struggles of Digital Asset Treasury Companies

Over the past few months, digital asset treasury companies (DATs) have faced increasing pressure regarding their valuations. Analysts have pointed out that these companies' market value is becoming more closely linked to the performance of their cryptocurrency holdings.

Some experts, such as those from venture capital firm Breed, assert that only the most resilient players will remain viable, cautioning that companies focused on Bitcoin might be better equipped to avoid a “death spiral.” This risk arises from a potential decline in their market net asset value (mNAV), which measures the relationship between enterprise value and the market value of their cryptocurrency investments.

Additionally, the rise of digital asset treasury companies has been likened to the volatile boom and bust of the dot-com era in the early 2000s, a time characterized by both visionary innovators and opportunists seeking quick profits.

Ray Youssef, the founder of peer-to-peer lending platform NoOnes, has predicted that most digital asset treasuries will not survive in the long term as they confront the harsh realities of the market.

Few Bitcoin Treasure Companies Will Survive: VC Report

As the market evolves and faces further volatility, the future of digital asset treasury companies remains uncertain.