MSTR, BMNR Investors May Face A ‘Hotel California’ Trap Amid Billions In Unrealized Losses, Analyst Warns

• 10x Research warned in its latest report that treasury companies may struggle to attract new retail investors while existing shareholders are heavily underwater.
• CEO Markus Thielen noted that digital asset treasury (DAT) products carry opaque fees and NAV premium risks that could trap investors.
• Strategy investors have absorbed roughly $20 billion in NAV losses since late 2024, and BitMine ETH holdings are down $3.7 billion.

Michael Saylor-backed Strategy (MSTR) and Tom Lee’s BitMine Immersion Technologies (BMNR) have struggled to maintain gains amid a deep sell-off in the cryptocurrency market that kicked off mid-October. 

According to 10x Research CEO Markus Thielen, these treasury companies may struggle to attract new retail investors while existing shareholders are sitting on billions in losses.

“Treasury companies will face a hard reality: attracting new retail investors becomes nearly impossible when existing shareholders are sitting on billions in losses.”

– Markus Thielen, CEO, 10x Research

MSTR’s stock is down more than 37% this year, while BMNR’s stock has fallen more than 75% since the company announced its pivot to an Ethereum (ETH)-backed digital asset treasury (DAT) on July 9. 

It’s DAT Risk

10x Research explained that when NAV rises, older shareholders benefit, but declines compound the damage. When the NAV premium shrinks toward zero, investors often find themselves trapped in the structure, a dynamic the analyst likened to a “Hotel California” scenario. The scenario implies that investors can buy into a fund with ease, but exiting becomes difficult. 

The report noted that, unlike ETFs, which trade closely around NAV, DATs layer on opaque, hedge-fund-like fee structures that can quietly erode returns. It warned that many investors underestimate these costs, which far exceed the 0.25% management fees charged by BlackRock’s Bitcoin and Ethereum ETFs. 

The research firm also predicted that, with BlackRock seeking approval to stake ETH in its ETF, which would offer a low-cost source of yield, the economics of DATs could face increasing scrutiny.

Unrealized Losses Of BMNR, MSTR Investors

The firm’s report stated that Strategy investors have already lost roughly $20 billion in net asset value (NAV) since the company began buying Bitcoin (BTC), mostly at unfavorable late-2024 prices. 

It added that BitMine’s Ethereum (ETH) holdings are down over $1,000 per coin, implying $3.7 billion in unrealized losses even before accounting for the NAV premium public investors paid.

Pre-Market Gains For MSTR, BMNR Stocks

MSTR’s stock gained more than 3% in pre-market trade on Thursday, with retail sentiment on Stocktwits trending in ‘bullish’ territory as chatter rose to ‘extremely high’ from ‘high’ levels over the past day. Bitcoin’s price staged a modest recovery in early morning trade, edging 0.4% higher in the last 24 hours. Retail sentiment around the apex currency, however, continued to trend in ‘bearish’ territory even amid ‘high’ levels of chatter.

Meanwhile, BMNR’s stock climbed more than 4% in pre-market trade with retail sentiment in the ‘bullish’ zone, accompanied by ‘high’ levels of chatter. The uptick came even as Ethereum led losses among the top 10 cryptocurrencies by market capitalization. ETH’s price fell 2.3% in the last 24 hours as chatter rose to ‘high’ from ‘normal’ levels, but retail sentiment continued to trend in ‘bearish’ territory over the past day.

According to BitMine’s executive chairman, Tom Lee, Ethereum is likely to hit bottom this week.

Read also: BTC Price Rebounds After ETF Flows Turn Positive – Solana Outperforms While Binance Coin, Ethereum Slide

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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