Net Asset Value (NAV) and Market Net Asset Value are two key metrics in Bitcoin Treasuries that are used to gauge their health. NAV indicates the asset liability structure of the treasury (including non-Bitcoin assets), while MNAV indicates the valuation of the company with respect to its total Bitcoin Holdings.
This article focuses on the difference between NAV and MNAV and explains the various situations in which they are used, including a few dummy examples for demonstration.
Note: For the sake of simplicity, it has been assumed that a crypto treasury is a company limited by shares and is publicly traded.
Digital Asset Treasury (DAT): Why It Might Be the Next Big Crypto Narrative?
Understanding Net Asset Value
Net Asset Value is the ratio between a company’s net assets (i.e., total assets minus liabilities) and the total number of outstanding shares. It gives the monetary value of assets held by the company per share.
NAV = (Total Bitcoin Holdings + Other Assets – Total Liabilities) ÷ (Total Outstanding Shares)
Here,
- Total Bitcoin Holdings = No of Bitcoins in Treasury x The Current Price of BTC
- Other Assets include cash reserves, receivables, bonds, equity, and other capital assets.
- Total Liabilities include debt, payables, and other debit (not debt) instruments.
- Total Outstanding Shares is the number of shares that have been issued by the company to all of its shareholders.
- All of the aforementioned values are calculated in fiat currencies like the US Dollar.
The metric is used to assess the health of the company with respect to its assets and liabilities. If the total assets of the company is higher than the total liabilities, the NAV will be higher and otherwise, it would be lower.
Let’s assume a company holds $10 million worth of Bitcoins, it has $100k in other assets and $500k in total liabilities, and it has 10,000 outstanding shares in the market.
To calculate the NAV,
NAV = (Total Bitcoin Holdings + Other Assets – Total Liabilities) ÷ Total Outstanding Shares
NAV = ($10 million + $100k – $500k) ÷ 10,000
NAV = $9,600,000 ÷ 10,000
NAV = $960
However, for the real profitability of the treasury, the NAV should be divided further by individual share value. This figure would give you the total number of assets held by the treasury for each dollar invested in it.
In our example, the company has a NAV of $960, and each share costs $1000, then the company holds $0.96 worth of assets for each $1 invested in it.
Typically, value above 1 is unlikely to be seen in the current market due to the high demand of Bitcoin. However, values below 0.75 indicate a possibly bad asset-liability ratio for the treasury i.e., either it has more liabilities or it has overpriced shares.
This confusion is better solved by our next metric, the Market Net Asset Value or MNAV.
Did you ever think, what if a Treasury owns just Bitcoin ETFs and no Bitcoins?
Understanding Market Net Asset Value
Market Net Asset Value, or MNAV, is the metric used to gauge the valuation of a crypto treasury. This metric is the ratio between the total market cap of the treasury company, like Strategy or Metaplanet, to the total asset holdings of these companies.
To calculate MNAV,
MNAV = Total Market Cap of the Treasury or Company ÷ Net Crypto Holdings
Here,
- Total Market Cap = No of Outstanding Shares in Market x Share Price
- Net Crypto Holdings = Total Crypto Holdings – Liabilities
Let’s assume a Bitcoin Treasury has a market cap of $140 million and holds around $100 million worth of Bitcoins. It has zero liabilities.
MNAV = 140 million ÷ 100 million
MNAV = 1.4x or 40% premium
For example, if the company treasury holds only Bitcoins, such as a company like Metaplanet, the Net Crypto Holdings would be the value of all Bitcoins at market value minus the debt on the company.
The aim of the metric is to understand whether the company’s treasury in question is overpriced or underpriced at any given moment. In other words, it checks how much crypto does the company own with respect to its market cap.
If a treasury has an MNAV of 1, it means that for each dollar invested, the company has an equivalent amount of crypto at the current market price.
Here is an interesting insight on how treasuries like Strategy increase their Bitcoin per share with a unique debt model.
If MNAV is below 1, then the company has underperformed. Its market cap is lower than all its crypto assets. Such treasuries are called as being sold at a discounted price. This happens in relatively lesser known treasuries like KULR, The Blockchain Group, etc.
If MNAV is greater than 1, then the total market cap has higher value than the assets of the company. This happens in popular treasuries like Strategy, Metaplanet, MARA, etc. Higher MNAV also signals risk due to inflated share price.
Trading at a premium actually helps treasuries issue more shares to buy more Bitcoins.
List of all Bitcoin Treasuries with their MNAVs.
The Differences
Scope of the Metric
NAV is used to gauge what each share is individually worth with respect to the treasury balance sheet, while MNAV gives a better idea of crypto ownership per dollar invested.
NAV does not give you a clear idea on how much crypto you own for your invested amount. You would have to divide NAV with share value to understand how much crypto you own for each dollar invested.
However, in the case of MNAV it gives you a clear idea on how much crypto you own per dollar. MNAV below 1 indicates you own less than a dollar worth of crypto for each dollar invested while MNAV above 1 indicates you own more crypto than what you invested.
Returns on Investment
NAV does not give you an idea on how much percentage return you have on your investment. It is an accounting metric.
Whereas, a MNAV score above 1 indicates positive returns while below 1, it shows negative returns.
We suggest you revisit the MNAV section, if you seek better clarity.
Market Dynamics
NAV does not give you an idea about the volatile nature of the markets. It simply gives you the asset-liability structure. Your invested treasury could be worth higher than all others, however, if its is incorporated in North Korea, the high value simply doesn’t matter.
Whereas, MNAV takes into account market dynamics. It reflects the true market value of your treasury. Typically MNAV trades at a premium, which is healthy and means the treasury shares are in high demand.
Note: In the economics of volatile markets like stocks and crypto, demand matters more than company’s vitals because it reflects the real world standing of the company.
Top Factors That Make Cryptocurrency Markets Unique From Stock Markets
Conclusion
NAV and MNAV are two important metrics that show the asset-liability match and the profitability of a crypto treasury. Although they might look the same, yet their scope and depth of application is varied. NAV is an accounting metric whereas MNAV is a metric to measure the market dynamics. However, both of them are frequently used to assess the health of a crypto treasury.
Related: What Is Fully Diluted Valuation (FDV) In Crypto? Its Importance and How to Use It
