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Author: Andrej Antonijevic, Source: Bitcoin Treasury, Compiler: Shaw Bitcoin Vision
Introduction
Banks have existed in various forms for hundreds of years.Their business models are often based on a simple economic mechanism: they take deposits and use this funding base to offer financial products such as mortgages, business loans, payment services and credit facilities.The difference between the return on assets and the cost of liabilities forms the basis of its profitability.
Because this business model is ubiquitous, regulated and measurable, capital markets have developed clear methodologies for bank valuation.One of the most widely used methodologies is the price-to-book (P/B) framework, which directly links a bank’s valuation to its long-term return on equity, cost of capital and sustainable growth rate.
As we enter the twenty-first century, a new type of balance sheet entity emerges: the Bitcoin Treasury Reserve Corporation.Such institutions issue capital (debt, preferred stock or equity) denominated in fiat currency to acquire and hold Bitcoin as part of a long-term money management strategy and treat Bitcoin as a capital asset.Although the underlying assets are different, the economic logic is very similar: both banks and Bitcoin treasury companies are engaged in capital conversion, so both can be analyzed using the same valuation principles.
This article shows how the price-to-book ratio framework used by banks can be directly applied to Bitcoin treasury companies, enabling investors to assess their value using an applicable and coherent analytical approach.
bank valuation framework
The bank’s price-to-book ratio valuation framework can be expressed as:
Among them:
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ROE is the bank’s return on net assets,
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r is the cost of equity (the rate of return required by investors),
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g is the long-term growth rate of book value per share and dividends.
If a bank’s return on equity is exactly equal to its cost of equity (ROE=r), it trades at the same price as its book value.If the ROE is higher than the cost of equity, it trades at a premium.If the ROE is less than the cost of equity, it is trading at a discount.
This logic is the basis of the price-to-book framework and forms the conceptual bridge to Bitcoin Treasury Corporation.
Applying the price-to-book ratio framework to Bitcoin treasury companies
Bitcoin treasury companies can be analyzed using the same valuation logic.Their book value is their net asset value (NAV), which is their Bitcoin equity and cash interests.
A Bitcoin treasury company’s ROE consists of three components:
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Bitcoin price rises in fiat currencies
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Bitcoin value per share (BTC yield) is achieved when new capital is raised at a price above net asset value (NAV), or when the financing enables the company to increase its Bitcoin per share holdings faster than passive investors.
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Leverage, that is, amplification.
Therefore, the relevant return on equity indicator is:
Among them:
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g_BTC=Bitcoin price growth in fiat currency,
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a = Bitcoin value appreciation per share (BTC yield),
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L=Leverage ratio (debt as a percentage of total assets),
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f = cost of debt.
The expression is similar to the bank’s return on equity (ROE) equation: operating earnings minus financing costs, adjusted appropriately for balance sheet structure.
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To demonstrate how this framework works in practice (not benchmarked against specific estimates, just for illustrative purposes), consider the following parameters:
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Bitcoin price rise: 15%
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Bitcoin value per share (BTC yield): 5%
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Leverage: 30%
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Cost of debt: 8%
The compound rate of return of Bitcoin appreciation and earnings per share growth:
Paying down debt reduces this ratio:
Give:
The cost of equity can be estimated using the Capital Asset Pricing Model (CAPM) approach, where the risk-free rate is 4% and the market risk premium is 4%.Depending on the Bitcoin Treasury Company’s beta (e.g., between 2.0 and 3.0, adjusted for leverage), the cost of equity value would be between 12% and 16%.
Under these example parameters:
Assuming that the long-term currency depreciation rate (i.e. inflation rate) is g = 4%, the result roughly falls between 1.2 times and 1.8 times the net asset value.
This is not a forecast, but a demonstration of the approach: valuations directly reflect the relationship between ROE, cost of equity and long-term growth, exactly as is the case for banks.
Why does this analogy hold?
The analytical symmetry between banks and Bitcoin treasury companies is no accident.Both rely on capital conversion:
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Banks convert low-yielding deposits into high-yielding loans and financial assets.
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Bitcoin Fund Management converts fiat funds into Bitcoin exposure, using balance sheet management to enhance long-term accumulation of Bitcoin per share.
In either case, value creation depends on the institution’s ability to maintain a sustained return on equity (ROE) above its cost of equity.This spread results from the following structural advantages:
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Financial advantages (access to low-cost funds)
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Risk management and option advantages (timing and structure of issuance),
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Franchise and trust advantages (the ability to effectively attract long-term capital).
These drivers determine the size and duration of the gap between ROE and interest rates, and thus whether the valuation multiple is above or below NAV.
Conclusion
The price-to-book model has been a cornerstone of bank valuations because it directly links valuations to underlying capital market economics.The same structure naturally applies to Bitcoin treasury companies:
The profitability of both types of institutions depends on the spread between their return on capital and the cost of capital.By adopting a proven banking framework, investors can analyze Bitcoin treasury companies based on a coherent, transparent lens to understand how balance sheet structure, issuance discipline and Bitcoin appreciation come together to shape their long-term value creation.
If this framework applies to banks, it applies equally to Bitcoin treasury companies, because in both cases, valuations ultimately reflect the economics of capital conversion.
