Crypto glossary
NAV premium and discount
A NAV premium or discount is the gap between a fund or treasury company's market price and the value of the crypto it holds, often shown as mNAV.
Net asset value (NAV) is what a vehicle's holdings are worth minus its liabilities. For an open-ended ETF, arbitrage by authorized participants keeps the share price within a fraction of NAV. Closed structures cannot be redeemed, so their price can drift far above or below. Bitcoin treasury companies are tracked with mNAV, market capitalisation divided by the value of their bitcoin.
Premiums signal investors pay extra for access, leverage or expected growth, and companies can issue shares at a premium to buy more bitcoin per share. Discounts appear when demand fades or redemption is blocked; the Grayscale Bitcoin Trust traded close to half its NAV in late 2022 before converting into an ETF.
A high premium can vanish quickly, so buying at 2x mNAV means paying two dollars for each dollar of bitcoin. Discounts can persist for years when there is no redemption mechanism. Comparing figures also requires care with debt, preferred shares and other assets.
Example
A company holding 1 billion dollars in bitcoin has a market value of 2.5 billion, so it trades at an mNAV of 2.5, a 150% premium to its holdings.