What happens to a company whose main business proposition relies on crypto values continuing to go up when prices start to falter? If you guessed that it can’t be good, you win one of those weird novelty banana thingies that count as carnival prizes.
A plethora of digital asset treasury companies, also known as DATCOs, have gone public worldwide in the past year, vying to duplicate the stunning stock market success of Strategy, the company founded by outspoken bitcoin proponent Michael Saylor and formerly known as MicroStrategy. Starting in August 2020, the firm acquired massive amounts of the cryptocurrency by issuing additional shares and taking on debt, essentially becoming a bitcoin holding company.
Along the way, Strategy persuaded investors to pay a healthy premium for its shares, becoming one of the best-performing major stocks on the planet and besting even Nvidia at times, with a 1,576% return vs. 1,519% for the AI chip giant through Nov. 18, and well ahead of the likes of Tesla (up 321%) and Alphabet (up 282%). Shares have traded at a premium as high as three times the value of Strategy’s underlying bitcoin assets, as Saylor articulated a strategy of continuously and efficiently buying vast amounts of the digital asset to capitalize on its massive, albeit volatile, appreciation.
Because in financial markets, as in life, imitation is the sincerest form of flattery, a host of competitors started applying the same strategy: not only to amassing bitcoin, but also to other leading cryptocurrencies such as Ether and Solana. From September 2024 to September 2025, the number of digital asset treasury firms roughly tripled to 200, led by companies such as Metaplanet and SharpLink Gaming, according to research from law firm DLA Piper.
The surge in supply, however, has been accompanied by a decline in premiums, with about 25% of bitcoin treasury companies now trading below the value of their bitcoin holdings, according to crypto research firm K33, and Strategy’s own premium falling to just 1.2 recently.
And then there’s the matter of timing: Bitcoin recently slid more than 30% from its high of $126,000 in October, while Ether and Solana suffered even larger drops. That tumble in digital asset prices has exacerbated the challenges facing DATCOs as the flywheel effect of higher crypto prices leading to higher stock prices leading to more crypto buying gets gummed up.
The situation is likely only to worsen, since eased US regulations mean that many more exchange-traded funds (ETFs) specializing in cryptocurrencies will soon be coming to market, creating more low-cost, highly liquid ways for investors to gain crypto exposure.
“We have for a long while been quite concerned with the huge premiums in these digital asset treasury companies, since it’s quite an inefficient structure of obtaining bitcoin exposure,” said Vetle Lunde, the head of research at Norway-based crypto OTC trading firm K33. Now, with the reduced premiums and other challenges facing many of these companies, “our opinion is that gravity is now doing its job,” Lunde added.
The most significant risk is that “if crypto prices continue to drop materially, then the DATs who are more levered up could at some point be forced sellers,” said Brian Rudick, the chief strategy officer for Solana-based digital asset treasury Upexi, “but that depends on the amount of leverage and when the debt is due for each company.”
He and other proponents and practitioners of crypto-holding strategies say that DATCOs offer value through low-cost, efficient accumulation of appreciating assets, as well as through the use of novel features such as staking to improve returns.
“If you feel confident in the underlying asset and [it] moves up, it’s possible or likely that the stock will perform even better,” Rudick explained; during down periods like now, “you’re just kind of on pause until the inevitable crypto bull market.”
But critics, of which there are many, say these strategies don’t justify the significant premiums to their underlying assets that many garnered in the past.
Sahm Adrangi, the founder and chief investment officer of Kerrisdale Capital, which has a short position in Ether DATCO BitMine Immersion Technologies and recently published a detailed report making its argument, likens digital asset treasuries to closed-end funds that either trade at a premium or discount to the value of their underlying assets.
“They’re a publicly traded asset that owns an asset. That’s a closed-end fund,” Adragi said. “And closed-end funds typically trade at a discount to what they own.”
To be sure, Lunde and others acknowledge there are some situations that justify the existence of DATCOs, in particular where institutions such as certain sovereign wealth funds and pension funds are prohibited from investing directly in digital assets, and can only do so through publicly traded companies.
But average investors are almost always better off just buying digital assets more directly, either through an ETF or natively.
The good news is that the impending shakeout in the digital asset treasury market likely won’t drag the whole sector down, since the companies still account for only a small portion of overall crypto ownership. A recent report from Standard Chartered found that DATCOs hold just 4% of all the bitcoin out there (with Strategy accounting for about 75% of that haul), 3.1% of all the ether and only 0.8% of all the Solana.
“I don’t foresee this being a big structural danger for bitcoin right now because most of these treasury companies are very small in the grand scheme of things,” Lunde said.
Nonetheless, the number of DATCOs will likely shrink significantly, returning to its roots when only Strategy and a few other firms operated in the space.
And when that happens? Volatility-enthralled crypto investors will probably just move on to the next hot new trend.
