Digital Asset Treasury Firms Face Decline Amid Waning Momentum

Digital Asset Treasury Companies (DATCOs) are reportedly facing challenges as market momentum declines. Founded on the premise of leveraging cryptocurrency for corporate gain, many of these firms are now showing signs of instability.

MicroStrategy’s Bitcoin Strategy

MicroStrategy made headlines in August 2020 by purchasing 21,454 BTC for $250 million. Founded by CEO Michael Saylor, the company shifted its focus toward accumulating Bitcoin, ultimately holding over 650,000 BTC valued at more than $50 billion.

Initially, MicroStrategy’s stock offered an indirect way for investors to gain exposure to Bitcoin. However, the landscape changed with the launch of spot Bitcoin ETFs in early 2024, providing a more straightforward option to invest in Bitcoin without the risks associated with corporate governance.

Market Shift for DATCOs

• Following the introduction of ETFs, the rationale for investing in MicroStrategy’s stock diminished.
• Despite this, many small-cap firms started repositioning themselves as Digital Asset proxies.
• Some firms maintained premiums over their underlying assets, leading to concerns about sustainability.

For example, firms like Metaplanet traded at eight times the value of their Bitcoin holdings as of June 2025. This phenomenon puzzled many analysts, with some labeling it as “financial gibberish.”

The Current Market Landscape

As the number of DATCOs surged beyond 200, some companies began to explore less conventional tokens. However, purchasing these securities came with risks as they might be buying at unknown premiums. Established firms like MicroStrategy started taking on debt to expand their crypto portfolios.

Plummeting Stock Prices

Recently, several DATCOs have exhibited troubling trends:

• Nakamoto, a Bitcoin treasury firm, merged with KindlyMD and saw its value plummet by 98%.
• BitMine, a US-based mining company, lost 77% of its value since integrating a DAT strategy.
• MicroStrategy itself experienced a 60% decline in stock price.

In response to falling prices, several firms resorted to selling their crypto assets to maintain stock values. For instance, ETHZilla sold approximately $40 million of its ETH treasury to support its declining stock price.

Potential Risks and Future Outlook

The reliance on debt among DATCOs raises significant concerns. If cryptocurrency prices continue to falter, these firms may face forced liquidation of their assets, further driving down prices. Research suggests that this crisis bears similarities to the 1920s investment trust boom, which contributed to the Great Depression.

DATCOs currently hold about 4% of the circulating Bitcoin supply and 1% of the ETH supply. While they represent a small portion of the crypto market, their failures could have widespread repercussions.

As the digital asset market grapples with this downturn, stakeholders must weigh the viability of the DATCO model, questioning whether it serves as yet another fleeting trend in the cryptocurrency realm.