How to Apply Bank Valuation Frameworks to Bitcoin Treasury Companies
Author: Andrej Antonijevic, Source: Bitcoin Treasury, Translation: Shaw Jinse Finance
Introduction
Banks have existed in various forms for hundreds of years. Their business model is typically based on a simple economic mechanism: they absorb deposits and use this funding base to provide financial products such as mortgages, corporate loans, payment services, and credit facilities. The difference between asset returns and liability costs forms the basis of their profitability.
Because this business model is widespread, regulated, and measurable, capital markets have developed clear methods for bank valuation. One of the most widely used methods 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.
Entering the 21st century, a new type of balance sheet entity has emerged: the Bitcoin treasury reserve company. These institutions issue capital denominated in fiat currency (debt, preferred stock, or equity) to acquire and hold bitcoin as part of a long-term capital management strategy, treating bitcoin as a capital asset. Although the underlying assets differ, the economic logic is very similar: both banks and bitcoin treasury companies engage in capital transformation and can therefore be analyzed using the same valuation principles.
This article demonstrates how the price-to-book framework used by banks can be directly applied to bitcoin treasury companies, enabling investors to use a relevant and coherent analytical method to assess their value.
Bank Valuation Framework
The price-to-book valuation framework for banks can be expressed as:
Where:
ROE is the bank’s return on equity,
r is the cost of equity (the return required by investors),
g is the long-term growth rate of book value per share and dividends.
If a bank’s return on equity exactly equals its cost of equity (ROE = r), it trades at book value. If ROE is higher than the cost of equity, it trades at a premium. If ROE is lower than the cost of equity, it trades at a discount.
This logic is the foundation of the price-to-book framework and forms the conceptual bridge to bitcoin treasury companies.
Applying the Price-to-Book 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), i.e., their equity in bitcoin holdings and cash.
The return on equity for a bitcoin treasury company consists of three components:
Bitcoin price appreciation denominated in fiat currency
Per-share bitcoin appreciation (BTC yield), realized when new funds are raised at a price above NAV, or when financing enables the company to increase its per-share bitcoin holdings faster than passive investors.
Leverage, i.e., amplification.
Therefore, the relevant return on equity metric is:
Where:
g_BTC = bitcoin price growth denominated in fiat currency,
a = per-share bitcoin appreciation (BTC yield),
L = leverage ratio (percentage of debt to total assets),
f = cost of debt.
This expression is similar to the bank return on equity (ROE) equation: operating returns minus financing costs, appropriately adjusted for balance sheet structure.
Framework Illustration
To demonstrate how this framework works in practice (not based on specific estimates, for illustrative purposes only), consider the following parameters:
Bitcoin price appreciation: 15%
Per-share bitcoin appreciation (BTC yield): 5%
Leverage ratio: 30%
Cost of debt: 8%
The compound return of bitcoin appreciation and per-share earnings growth:
Debt repayment reduces this ratio:
Giving:
The cost of equity can be estimated using the Capital Asset Pricing Model (CAPM) approach, with a risk-free rate of 4% and a market risk premium of 4%. Depending on the bitcoin treasury company’s beta (e.g., between 2.0 and 3.0, adjusted for leverage), the cost of equity will range between 12% and 16%.
Under these illustrative parameters:
Assuming a long-term currency depreciation rate (i.e., inflation rate) of g = 4%, the result roughly falls between 1.2 and 1.8 times net asset value.
This is not a prediction, but a demonstration of the method: valuation directly reflects the relationship between ROE, cost of equity, and long-term growth, exactly as in the case of banks.
Why This Analogy Holds
The analytical symmetry between banks and bitcoin treasury companies is not accidental. Both rely on capital transformation:
Banks transform low-yield deposits into high-yield loans and financial assets.
Bitcoin capital management companies transform fiat funds into bitcoin exposure, using balance sheet management to enhance long-term per-share bitcoin accumulation.
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 arises from the following structural advantages:
Funding advantage (access to low-cost capital)
Risk management and optionality advantage (timing and structure of issuance),
Franchise and trust advantage (ability to effectively attract long-term capital).
These drivers determine the size and duration of the gap between return on equity and interest rates, thus determining whether the valuation multiple is above or below net asset value.
Conclusion
The price-to-book model has long been the cornerstone of bank valuation because it directly links valuation to the 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 the established banking framework, investors can analyze bitcoin treasury companies from a coherent and transparent perspective, thus understanding how balance sheet structure, issuance discipline, and bitcoin appreciation together shape their long-term value creation.
If the framework applies to banks, then it equally applies to bitcoin treasury companies, because in both cases, valuation ultimately reflects the economic benefits of capital transformation.
