(Reuters) -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 U.S. 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.
RISKS 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.
