Summary of this article
Crypto treasury firms face rising risks amid market volatility.
Companies diversify into smaller, riskier tokens for higher returns.
Many firms now trade below net asset value..
Companies that invest substantially in Bitcoin and other big cryptocurrencies are under increasing pressure as markets become overcrowded and sentiment declines. Newer firms are turning to smaller, less-known tokens, raising concerns about heightened volatility.
The market for digital asset treasury (DAT) companies has expanded rapidly. As of September, around 200 firms, mostly focused on Bitcoin, had a combined valuation of roughly $150 billion, more than three times that of the previous year, according to law firm DLA Piper. Smaller companies are also entering the market that seeks higher returns by investing in more volatile tokens. It is reported that many of these firms are launching daily, often as penny stocks aiming to boost profits.
Reuters reported that recent incidents includes Greenlane, OceanPal, and Tharimmune which have announced plans to acquire tokens like BERA, NEAR and Canton Coin. This trend shows the growing overlap between cryptocurrencies and traditional markets, which increases potential hazards for investors. Cristiano Ventricelli, vice president and senior analyst of digital assets at Moody’s Ratings, told the agency that DATs are expanding into less liquid and riskier cryptocurrencies, which could amplify pressure on equity when prices fall.
Since April, many DATs have funded token purchases through private placements (PIPEs), selling shares directly to private investors at a discount. It is reported that at least 40 companies raised over $15 billion via PIPEs between April and November, where only a few were focused on Bitcoin. Reliance on PIPEs provides quick cash but can lead to shareholder dilution and stock price volatility once lockup periods end.
This was noticeable in October, when markets fell amid increasing US-China trade tensions. BitMine, which invests in Ether, fell more than 11 per cent, Forward Industries, which holds Solana, declined over 15 percent, and Strategy, an established Bitcoin DAT, fell nearly 5 percent. Some companies that include ETHZilla and Forward Industries have approved share repurchases to stabilize their stock prices.
Many DAT companies are also trading below the net asset value of their crypto holdings. At least 15 Bitcoin-focused treasury firms were below their token values, while retail investors in high-profile Bitcoin DATs reportedly lost around $17 billion, according to Reuters. Analysts warn that although the sector grew initially on optimism, many firms may continue trading at a discount to their underlying digital assets, reflecting the risks of volatility and speculative investments.
