Hidden crises under the boom of crypto asset treasury companies: Which tokens are most at risk?

Original title: The Boom and Potential Bust of Digital Asset Treasury Companies: Which Tokens are Most Exposed?

Original source: Anthony DeMartino - ADM

Original compilation: Janna, ChainCatcher

Since the beginning of this year, digital asset treasury companies, as a typical representative of the wave of currency and stock integration, have developed rapidly. However, such treasury companies inject liquidity into mainstream assets such as Bitcoin and Ethereum while also exposing certain vulnerabilities. This article comes from Anthony DeMartino, founder of Sentora and general partner of venture capital firm Istari, on the potential risks behind the DATs track boom. ChainCatcher has been compiled without changing the original meaning for readers' reference, but it should be noted that this article does not constitute any investment advice.

The following is the original text:

In 2025, a new type of listed companies will attract a lot of attention from investors: digital asset treasuries (DATs). Such entities, often with cryptocurrencies like Bitcoin as their core reserve assets, have raised over $15 billion this year alone, surpassing the size of traditional venture capital in the crypto space. This trend was spearheaded by companies like MicroStrategy and is gaining momentum, with more and more companies accumulating digital assets through the open market. While this strategy can bring huge gains during a bull market, it also carries inherent risks that can lead to a painful wave of liquidations, which in turn can increase volatility in the stock market and crypto markets.

(1) Operating model

The establishment of DATs usually relies on innovative financing structures, including the incorporation of NASDAQ-listed shells through reverse mergers. This allows private entities to go public quickly without the rigorous scrutiny of traditional initial public offerings (IPOs). For instance, in May 2025, Asset Entities and Strive Asset Management formed a treasury-focused company focused on Bitcoin through a reverse merger and acquisition.

Other examples include Twenty One Capital, backed by SoftBank and Tether, to create a $3.6 billion Bitcoin investment vehicle through a reverse merger with Cantor Equity Partners. These companies raise capital through stock offerings after going public, and invest almost all of the raised funds in digital assets. Its core mission is clear: to buy and hold cryptocurrencies like Bitcoin, Ethereum, SOL, XRP, and even TON.

This model realizes the cross-integration of traditional finance and cryptocurrency, providing investors with an investment vehicle to obtain "leveraged exposure" without directly holding assets.

(2) Stock price rise and premium trading

During the crypto bull market, DATs' stocks tend to rise sharply and have a significant premium to their net asset value (NAV). As a benchmark for this model, MicroStrategy's stock price has been at a premium of more than 50% to its Bitcoin NAV, and its multiple NAV (mNAV) ratio has recently reached 1.56.

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This premium is due to several factors: first, the ability of these companies to access low-cost open market funding; second, investors' enthusiasm for cryptocurrency leverage bets; Third, the market regards such companies as a carrier to amplify stock returns.

When the stock price is above NAV, the dilution effect on shareholders for every $1 raised is lower than the increment in value from asset purchases, creating a virtuous cycle. In 2025, public companies and investors cumulatively acquired more than 157,000 Bitcoins, valued at over $16 billion, further fueling this momentum. Stocks of Metaplanet, Bitmine, SharpLink, and others have all seen significant gains, often outpacing the price gains of their underlying cryptocurrencies.

(3) Leverage: Adding fuel

As premiums persist, DATs often amplify returns by leveraging. They issue convertible bonds or additional shares to purchase more digital assets, essentially borrowing against future appreciation. MicroStrategy, for example, has extensive use of convertible notes, and its debt size already accounts for 11% of its Bitcoin NAV.

This strategy amplifies gains in a rising market but exposes the company to significant risks when the market falls. Leverage reduces a company's resilience to shocks, potentially triggering margin calls or forced selling. The allure is clear: in a rising market, leverage can transform modest gains from cryptocurrencies into explosive performance in stocks. However, the inherent high volatility of digital assets can lead to rapid shrinkage in asset value.

(4) Inevitable decline: from premium to discount

The high volatility of the crypto market is known to fall even more when cryptocurrency prices fall. If prices fall too quickly, or if market confidence in such companies weakens, the premium to NAV can quickly turn into a discount. Leveraged positions can further exacerbate this problem: a decline in NAV will force companies to de-risk, creating a volatility trap where bets that would otherwise amplify returns will instead cause greater losses to holders.

discount in the stock price relative to the NAV means that the market has doubts about the company's ability to manage assets or cover operating expenses during periods of falling asset values. If no intervention is taken, there will be ripple effects: loss of investor confidence, rising borrowing costs, and potential liquidity crises.

(5) Options in the crisis: three paths forward

Assuming that a DAT has sufficient cash reserves to cover operating expenses, it faces three main options when trading at a discount in stock price:

1. Maintain the status quo: The company continues to hold assets and wait for the market to rebound. This method preserves cryptocurrency holdings but can lead to long-term shareholder dissatisfaction, which in turn exacerbates the decline in stock prices. As of now, Strategy has maintained its unsold Bitcoin in multiple bear markets.

2. Peer Acquisitions: If the discount is significantly expanded, some speculative buyers (often other DATs) may acquire the company at a low price, essentially buying its underlying token at a price below market value. This will promote industry consolidation, but it will also release demand in advance and weaken new buying flows, which is also one of the core drivers of the current rally.

3. Selling assets to buy back shares: The company's board of directors may sell some digital assets to buy back shares to reduce discounts and restore the stock price to NAV. This approach actively manages premium and discount dynamics, but essentially sells cryptocurrencies when the market is weak.

These three options highlight the fragile balance between asset preservation and shareholder value.

(6) Selling pressure: motivation and influence

DATs Decision-makers usually use stocks as the main form of compensation. This, while tying their interests to stock price performance, also leads them to lean towards short-term solutions. Since personal wealth is directly related to stock prices, boards are under great pressure to choose a strategy that combines selling assets with stock buybacks when stock prices are discounted.

This incentive structure may lead companies to prioritize short-term NAV parity rather than adhering to a long-term holding strategy, leading to hasty decisions that go against the logic of the original reserve assets. Critics argue that this mechanism is similar to the historical "boom-to-bust" asset cycle, where leveraged bets eventually collapse in a tragic way. If multiple companies choose this strategy at the same time, it can trigger a ripple effect and lead to broader market turmoil.

(7) Broad impact

The process of DATs stock prices moving from premium to discount can have a profound impact on the underlying cryptocurrency prices, often forming a negative feedback loop: when companies sell tokens to buy back shares or cover leverage, they inject additional supply into an already falling market, further exacerbating price declines. For example, banking analysts warn that if the price of Bitcoin falls by more than 22% from the average buying price of companies, it could trigger a forced sell-off.

This triggers systemic risk: the actions of large holders can influence market dynamics, amplify volatility, and potentially lead to cascading liquidations. However, some data shows that corporate holdings have less direct impact on prices, and the market may overestimate the influence of digital asset library companies.

Still, in a highly leveraged ecosystem, synergistic selling can further depress asset values, discourage new players from entering, and prolong bear market cycles. As the DAT trend matures, its unwinding wave could test the resilience of the entire crypto market, turning today's reserve asset boom into a cautionary tale for the future.

(8) Which token will be most affected by the discount transformation?

Since the beginning of 2025, Ethereum-focused DATs have emerged as significant players in the crypto ecosystem. They accumulate significant Ethereum (ETH) holdings through open market financing. Although this drives Ethereum prices higher during bull markets, the pattern introduces additional risks in a bear market: when DATs stock prices move from premium NAV to discounted NAV, boards will be under pressure to sell Ethereum to finance share buybacks or cover operating expenses, which could further exacerbate Ethereum's price decline. The following will analyze the possible price bottom of Ethereum in such scenarios based on historical background, current positions, and market dynamics.

(9) Historical background: The price trend

The first Ethereum-focused DAT announcement was made by BioNexus Gene Lab Corporation on March 5, 2025, marking the official transformation of the Nasdaq-listed company into an Ethereum asset strategy company. Prior to this, on March 4, 2025, Ethereum closed at around $2,170, a price that reflects the market's consolidation amidst widespread uncertainty following the 2024 bull run.

As of August 21, 2025, the price of Ethereum is around $4,240, an increase of about 95% from the price before the announcement. In comparison, BTC has risen by just 28% during the same period. Additionally, the ETH/BTC exchange rate has also hit a 2025 high (above 0.037), highlighting Ethereum's outperform.

Ethereum's rise is driven by multiple factors, including spot Ethereum ETF inflows (over $9.4 billion since June), rising institutional adoption, and corporate buying from the DAT trend itself. However, a significant portion of this rally stems from speculative inflows tied to the DAT narrative, making it prone to pullbacks.

(10) The proportion

Since BioNexus' announcement started the Ethereum DAT wave, listed companies have begun to actively accumulate Ethereum as a reserve asset. As of August 2025, approximately 69 entities hold over 4.1 million Ethereum, valued at approximately $17.6 billion. Key players include: BitMine Immersion Technologies (industry leader with $6.6 billion worth of holdings as of August 18), SharpLink (728,804 ETH), ETHZilla (approximately 82,186 ETH), Coinbase, and Bit Digital.

These companies hold more than 3% of Ethereum's total supply. Since the Ethereum DAT trend started in March 2025. Previously, few listed companies had used Ethereum as a reserve asset, such as Coinbase's Ethereum holdings, which were primarily used for operations rather than strategic reserves. These 3.4% of the positions are basically new acquisitions after the start of the DAT trend. When accounted for in institutional and ETF holdings, Ethereum's institutional holdings account for about 8.3% of the total supply, but the core driving force accumulated recently is still DAT-related corporate buying.

(11) When the DATs stock price is discounted, the price of Ethereum is predicted

During bull markets, DATs stock prices typically have a premium to NAV; However, in a bear market, the original premium may reverse to a 20%-50% discount, triggering three coping paths: maintaining the status quo, being acquired, and selling assets to buy back shares. Since executive compensation is tied to stocks, they prefer to reduce the discount by selling Ethereum, which injects additional supply into the market. For Ethereum, this sell-off could create a negative feedback loop, especially considering the concentrated holding characteristics of a few companies holding large amounts of Ethereum.

1. Benchmark scenario (slight discount, partial sell-off)

If Ethereum enters a correction phase due to macro factors (such as rising interest rates) and the DATs stock price falls to a 10%-20% discount, companies may sell 5%-10% of their Ethereum holdings (approximately 205,000 to 410,000 ETH, valued at $870 million to $1.74 billion at current prices) to raise funds for share buybacks. Ethereum's average daily trading volume is around $15 billion to $20 billion, so this part of the sell-off could bring 5%-10% downward pressure, sending the price down to $3,600-3,800 (down 10%-15% from the current $4,240). This scenario assumes that the company sells gradually through over-the-counter (OTC) trading to minimize slippage.

2. Severe scenario (deep discount, coordinated selling)

If the crypto market enters a full-blown bear market (the premium disappears completely and the discount expands to 30%-50%), multiple DATs may initiate liquidation at the same time - especially if leveraged positions (such as convertible bonds) force them to de-risk. If 20%-30% of corporate Ethereum holdings (approximately 820,000 to 1.23 million ETH, worth $3.5 billion to $5.2 billion) flood the market within a few weeks, it could break through the market's liquidity carrying capacity and cause the price to drop by 25%-40%. At that time, the price of Ethereum may fall to $2,500-3,000, close to the level before the DAT trend started, but not completely back down - thanks to the financial support of ETFs and on-chain growth (for example, Ethereum's average daily trading volume reached 1.74 million in early August). Referring to historical cases where institutional sell-offs amplified losses in the 2022 bear market, Ethereum's volatility may further intensify considering the current concentration of corporate holdings at 3.4%.

3. Worst-case scenario (full liquidation)

If regulatory scrutiny intensifies (such as the US SEC taking action against treasury companies) or a liquidity crisis breaks out, forcing companies to sell Ethereum on a large scale (possibly selling more than 50% of their positions, i.e., more than 2 million ETH), the price may plummet to $1,800-2,200, completely erasing the gains after the start of the DAT trend and testing the 2025 low. However, the probability of this scenario occurring is low due to the fact that peer buyouts may absorb some of the supply, and ETF holdings that account for 8% of the total supply can also provide some buffer.

The above predictions have taken into account improvements in Ethereum's fundamentals, such as the cumulative acquisition of 200,000 ETH by whales in the second quarter of 2025, but still highlight specific risks associated with DAT. Ultimately, the magnitude of Ethereum's price decline depends on the size of the sell-off, market depth, and external catalysts, but in a discount-driven liquidation scenario, it is reasonable for the price to fall back to the $2,500-$3,500 range, which also exposes the vulnerability of the DAT pattern.

Disclaimer:

The contents of this article do not represent the views of ChainCatcher, and the opinions, data, and conclusions in this article represent the personal views of the original author or interviewees, and the compiler maintains a neutral attitude and does not endorse its accuracy. It does not constitute advice or guidance in any area of expertise and should be used with caution based on independent judgment. This compilation is limited to knowledge sharing purposes, and readers are requested to strictly abide by the laws and regulations of their region and not participate in any illegal financial activities.

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