Nakamoto’s 99% Collapse Reveals the Bitcoin Treasury Death Spiral

Points of Focus

• Nakamoto shares have fallen roughly 99% from their 2025 peak, showing how quickly the Bitcoin treasury premium can disappear.
• The company sold about 600 BTC to help repay $45 million of debt, demonstrating how leverage can force treasury firms to sell the asset they were built to accumulate.
• Nakamoto still had $164.7 million in debt against $19.1 million in cash at June-end, with 3,805 of its 4,467 BTC pledged as collateral.

Nakamoto was built around one of the most powerful trades of the previous Bitcoin (BTC) cycle: raise capital through public markets, convert the proceeds into Bitcoin, and allow investors to buy the stock at a premium to the cryptocurrency sitting on the balance sheet. When that premium persists, the company can issue more securities, acquire more Bitcoin, and potentially increase Bitcoin exposure per share.

David Bailey’s Nakamoto showed how quickly the same mechanism can work in reverse.

NAKA has fallen roughly 99% from its 2025 peak, forcing the company to complete a 1-for-40 reverse stock split in May 2026 after its share price fell below Nasdaq’s minimum bid requirement. 

Nakamoto entered the market through its combination with KindlyMD, backed by a $510-million private investment and $200 million of convertible notes, but the enormous enthusiasm surrounding the Bitcoin treasury strategy did not survive the subsequent crypto downturn.

Trump Crypto Ally David Bailey’s Nakamoto Shares Plunge 99% From Peak

According to Bloomberg, crypto entrepreneur David Bailey raised approximately $760 million last year for Nakamoto, his Bitcoin treasury company. Since its merger and public listing in May 2025, Nakamoto’s… pic.twitter.com/oceCIj2ang

— Wu Blockchain (@WuBlockchain) September 2, 2026

The significance extends beyond one badly performing stock. Nakamoto’s collapse exposes the negative feedback loop embedded in highly leveraged Bitcoin treasury companies: Falling Bitcoin prices compress the value of their assets, falling share prices eliminate their ability to raise accretive equity, financing costs become harder to absorb, and Bitcoin itself can eventually become a source of liquidity.

That is the Bitcoin treasury “death spiral,” and Nakamoto has already demonstrated several stages of it.

Treasury flywheel depends on a premium

The corporate Bitcoin strategy is often described as simply buying and holding BTC, but that understates what made the model so attractive during rising markets.

A treasury company trading substantially above the value of its Bitcoin has a valuable second asset: its own stock.

Suppose a company holds $1 billion in Bitcoin, but investors value its stock well above that. So, it issues a small amount of pricey stock, uses the cash to buy more Bitcoin, and boosts BTC-per-share.

This creates a reflexive loop: More Bitcoin draws investors, the premium enables more stock issuance, and that funds more Bitcoin purchases.

But it only works while investors keep paying a premium over the actual Bitcoin held. If the stock price drops to or below that value, issuing new shares starts diluting existing shareholders instead of helping them.

That problem is no longer theoretical. By late June, Nakamoto was among several major treasury companies trading below an enterprise market-to-net-asset value (mNAV) of 1, alongside Strategy and Metaplanet. Enterprise mNAV attempts to account for the wider capital structure, including debt and cash, rather than simply comparing market capitalization with gross Bitcoin holdings.

Below that threshold, the capital-raising logic changes dramatically. The company can still issue shares, but it may be selling equity too cheaply to make buying additional Bitcoin beneficial for existing shareholders.

The flywheel then begins turning backward.

Nakamoto has already sold Bitcoin to reduce debt

Nakamoto’s second-quarter balance sheet demonstrates why leverage makes that reversal particularly dangerous.

The company held 4,467 BTC worth $261.5 million as of June 30. Against those digital assets, Nakamoto reported $164.7 million of total debt and only $19.1 million of cash and cash equivalents. Its own net leverage-to-digital-assets ratio stood at 56%.

More strikingly, 3,805 of Nakamoto’s 4,467 BTC were pledged as collateral for its note payable, meaning 85% of its reported Bitcoin holdings were tied to the financing arrangement at quarter-end.

Nakamoto therefore cannot be understood simply by looking at the dollar value of its Bitcoin and comparing it with the company’s market capitalization. The claims sitting above common shareholders matter enormously.

During the second quarter, the pressure became tangible. Nakamoto sold approximately 600 BTC and certain derivative positions for about $48 million in net proceeds, using most of that money to repay 45 million Tether USDt (USDT) of its Bitcoin-backed loan. It also extended about 105 million USDT of principal until June 30, 2027.

The transaction was sensible balance-sheet management because it reduced leverage and interest expense. Yet it also illustrates the central contradiction of a leveraged Bitcoin treasury strategy: The asset a company is attempting to accumulate indefinitely can become the asset it needs to sell when financing conditions deteriorate.

This is where the death-spiral thesis becomes more than a catchy description.

A company raises debt to acquire Bitcoin because it expects BTC to appreciate. Bitcoin declines, reducing the value of the collateral and the company’s equity. The falling share price makes new equity issuance unattractive, while the debt remains outstanding. If operating cash flows cannot comfortably service the obligations, selling Bitcoin becomes one of the remaining ways to deleverage.

That reduces the treasury, potentially weakens the investment thesis, and can place additional pressure on the stock.

Nakamoto’s 99% decline wasn’t simply Bitcoin’s decline

Bitcoin’s weakness undoubtedly contributed to Nakamoto’s problems, but the scale of NAKA’s collapse cannot be explained by Bitcoin alone.

For the six months ending June 30, Nakamoto reported a net loss of $371.8 million. In the second quarter alone, its net loss reached $133 million, while its operating loss was $149.1 million.

Some of those headline losses require context. About $105.2 million of the second-quarter operating loss came from non-cash goodwill impairments related to acquired businesses, while $48.7 million came primarily from mark-to-market losses on digital assets. Nakamoto simultaneously generated $35.9 million of quarterly revenue and reported adjusted operating income of $7.3 million.

Small detail worth filing away, part four: look at who owns the company behind UTXO Management 👇

UTXO Management is a Bitcoin-focused investment firm. In February it was acquired by Nakamoto (Nasdaq: NAKA), the Bitcoin treasury company run by David Bailey, alongside BTC Inc,… https://t.co/04yZxU171e

— hodLNothing.btc 🟧 (@hodlstxbtc) September 9, 2026

Its derivatives program also provided some protection. Nakamoto reported $9.3 million of derivative revenue from strategies intended to mitigate part of its Bitcoin downside exposure, alongside $1.2 million from strategies designed to monetize Bitcoin volatility.

This makes Nakamoto more sophisticated than a passive shell whose only activity is purchasing BTC. It now owns Bitcoin-related operating businesses, including BTC Inc and UTXO Management, and has been attempting to develop recurring revenue outside the treasury itself.

Nevertheless, the share-price collapse shows that investors no longer value those components — the treasury and the company’s capital-markets strategy at anything resembling the multiples seen during the original excitement.

That repricing matters because treasury companies rely on their own valuations as part of their financing machinery.

Death spiral doesn’t require Bitcoin to go to zero

The biggest vulnerability in the treasury model is that Bitcoin does not need to suffer a catastrophic collapse for the financing structure to encounter problems.

Imagine BTC simply trades sideways or remains depressed for an extended period. The company still has salaries, interest expenses, corporate overhead, and debt obligations, while its stock may continue losing its premium because investors can obtain straightforward Bitcoin exposure through exchange-traded funds (ETFs), exchanges, or self-custody.

A treasury company with meaningful operating cash flow can absorb that period more easily. A company dependent on repeatedly accessing capital markets has fewer options.

Equity issuance becomes less attractive as mNAV falls. Borrowing more introduces additional interest expense and leverage. Selling Bitcoin reduces the very asset exposure investors originally bought the stock to obtain.

The result can become self-reinforcing even without another major Bitcoin crash.

Nakamoto’s changing business strategy appears to recognize this problem. Bailey has said the company is looking for acquisitions capable of improving income and cash flow while also providing strategic value to Bitcoin. That represents an important evolution from the pure treasury model because independent operating cash flow reduces dependence on repeatedly issuing securities to finance the company.

The problem is spreading beyond Nakamoto

Nakamoto is an extreme example, but it is not an isolated one.

An analysis of the 50 largest corporate Bitcoin holders found their combined market capitalization had fallen from $150 billion in July 2025 to $67 billion by August 2026, wiping out more than $80 billion. Of those 50 companies, 43 were trading below their share prices before adopting Bitcoin treasury strategies, while 35 had lost more than half their value.

That suggests the market is reassessing the proposition of paying a premium for Bitcoin wrapped inside a public company.

BitcoinTreasuries data showed the scale of the phenomenon earlier this year. By March, Strategy held 762,099 BTC, Twenty One Capital held 43,514 BTC, and Metaplanet held 35,102 BTC, while several treasury-focused companies were already trading at mNAVs below 1.

Even Strategy, whose capital-markets machine is considerably larger and more developed than most imitators, briefly fell below an enterprise mNAV of 1 in June. Its growing reliance on preferred securities also introduced substantial dividend obligations, illustrating that alternative financing structures do not eliminate the cost of capital simply because they avoid issuing ordinary shares.

The distinction between Strategy and many imitators is becoming more important. Holding Bitcoin is easy; maintaining access to capital through multiple market cycles is considerably harder.

Bitcoin was never the only asset behind the strategy

The treasury boom encouraged investors to measure success primarily through BTC holdings, but Nakamoto’s experience shows why that metric can be dangerously incomplete.

As of June 30, Nakamoto’s Bitcoin was worth approximately $261.5 million, while its market capitalization was just $70.7 million. Looking at those figures alone could make the stock appear extraordinarily discounted.

Yet Nakamoto also carried $164.7 million of debt. After subtracting $19.1 million of cash, net debt stood at approximately $145.6 million. Nakamoto calculated enterprise value at $216.3 million at quarter-end, much closer to the value of its digital assets than the headline market-cap comparison suggests.

This is the lesson Nakamoto’s 99% collapse exposes most clearly.

A Bitcoin treasury company’s real asset is not merely Bitcoin; it is the combination of Bitcoin, access to inexpensive capital, investor willingness to pay a premium for that exposure, and increasingly, the ability to generate cash independently of BTC appreciation.

When all four are working together, the model can be extraordinarily powerful. When the premium disappears and the cost of capital rises, leverage can transform Bitcoin from the engine of the flywheel into the liquidity needed to keep the company running.

Nakamoto still holds thousands of Bitcoin and has taken steps to reduce leverage, hedge downside exposure, and build operating businesses. Its story is far from finished.

But the 99% collapse has already revealed the flaw in the simplest version of the corporate Bitcoin thesis. Buying Bitcoin does not create a perpetual financial machine; the machine works only for as long as capital markets are willing to finance it on favorable terms.

Once they stop, the question is no longer how much Bitcoin the company can buy next — it is how much Bitcoin it can afford not to sell.