Crypto treasury firms shift to fringe tokens as bitcoin rally cools

Treasury firms chase lesser-known coins for returns, triggering warnings over instability

As companies focused on stockpiling bitcoin and other major cryptocurrencies come under pressure amid market saturation and souring sentiment, new entrants are pushing into less popular tokens, stoking worries over increased volatility.

Buoyed by US President Donald Trump's crypto-friendly stance and inspired by the meteoric success of Michael Saylor's Strategy, the number of publicly-traded companies investing in cryptocurrencies in the hopes they will appreciate has boomed.

As of September, there were at least 200 digital asset treasury, or DAT, companies - mostly focused on bitcoin - with a combined capitalization of around $150 billion, up over threefold from a year earlier, according to an analysis by law firm DLA Piper.

More companies, many of them penny stocks seeking ways to boost profits, are launching daily. But as bitcoin sags, they are turning to esoteric, more volatile tokens in a bid to amplify returns, according to a Reuters analysis of more than three dozen company announcements.

Risk ahead for investors?

In recent weeks, for example, Greenlane, OceanPal, and Tharimmune, announced plans to stockpile BERA, NEAR and Canton Coin, respectively.

The trend illustrates how the often-volatile and speculative world of cryptocurrencies is becoming more entwined with traditional markets, creating potential hazards for investors.

"DATs are expanding towards more exotic and less liquid cryptocurrencies, and that's exactly where the risk could be much higher," said Cristiano Ventricelli, vice president and senior analyst of digital assets at Moody’s Ratings.

"When markets drop, there is more pressure on the equity of these companies," Ventricelli added.

A volatility pipeline

Since April, many DATs have funded token purchases via private placements or PIPEs - selling shares directly to private investors - usually at a discount.

At least 40 DATs raised more than $15 billion combined via PIPEs between April and November, only five of which were focused on bitcoin, Reuters' analysis found. Bitcoin registered a monthly loss in October for the first time since 2018.

Heavyweight crypto investors in these deals include Winklevoss Capital, Galaxy Digital, Jump Crypto, Pantera Capital, Kraken and DWF Labs, public data shows.

While some institutional investors can buy tokens directly, DATs offer the chance to leverage returns and let more cautious investors gain crypto exposure through regulated public firms.

PIPEs allow companies to quickly access cash, but shareholder dilution and the potential resale of shares when lockup periods end often stoke stock price volatility. And because many DAT companies are so reliant on PIPEs, they are especially vulnerable when markets fall, say analysts.

That was evident on October 10 when markets slumped on renewed US-China tariff tension. BitMine, which stockpiles ether, fell more than 11% and Forward Industries, which invests in Solana, fell more than 15%. Strategy, which has funded purchases through other means, fell nearly 5%.

"The hype has deflated since when the DATs first came to the market. But I think it could come back," said Peter Chung, research head of crypto-focused Presto Research.

An OceanPal spokesperson said its NEAR purchases offered shareholders a way to benefit from the token's integrated AI capabilities. Greenlane declined to comment.

Strategy, BitMine, Tharimmune, Winklevoss Capital, Galaxy Digital, Jump Crypto, Pantera Capital, Kraken and DWF Labs did not immediately respond to requests for comment.

Trading below net asset value

Many DAT companies earlier this year traded at a premium to their crypto holdings because investors believed they could use their access to credit to purchase more tokens.

But as bitcoin has flagged and Strategy copycats flooded the market, some are wobbling. At least 15 bitcoin treasury companies were trading below the net asset value of their tokens as of Friday, according to data from crypto publication The Block.

Retail investors, who are big buyers of Strategy and other high-profile bitcoin DATs, lost around $17 billion on these trades, Singapore firm 10x Research estimated last month, Bloomberg reported.

Some DATs focused on other large coins are also under pressure. ETHZilla and Forward Industries recently approved share repurchases, a move typically aimed at propping up share prices.

"I think most of these digital asset treasury companies will wind up trading at a discount to the digital asset," said Michael O'Rourke, chief market strategist at JonesTrading.

'Absolutely decimated'

DAT companies hold 4% of all bitcoin, 3.1% of all ether and 0.8% of all solana, meaning their fortunes could have major implications for coin prices, Standard Chartered analysts wrote in a September note, adding they expected consolidation in the space.

Kyle Samani, chairman of Forward Industries, said in a statement that the company's buyback provides "flexibility to return capital to shareholders when we believe our stock trades below intrinsic value."

He and other DAT executives say their success will be rooted in their ability to make smart investing decisions.

"You're betting on the management team to go do interesting things, and that's what we're trying to do," Samani, who is also co-founder of Multicoin Capital, which invested in Forward Industries' September PIPE, said in an interview.

An ETHZilla spokesperson said the company was opportunistically repurchasing shares while its stock traded below net asset value, and that while it holds a lot of ether, it is mostly focused on putting traditional assets onto the blockchain.

Likewise, other DAT companies are looking for new ways to boost shareholder value. SUI Group, which stockpiles Sui, recently launched its own stablecoins, said Chairman Marius Barnett.

If a DAT just sits back and only buys tokens, "long term, you're going to get absolutely decimated," he added.