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Crypto Asset Treasury Companies Thriving Amid Hidden Crisis: Which Tokens Pose the Highest Risk?

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During a crypto bull market, DATs' stock price tends to experience a significant increase, trading at a substantial premium to Net Asset Value (NAV). However, this pattern exposes the company to high risk during market downturns, potentially triggering margin call notifications or forced liquidation of leveraged positions.

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

Original Article Source: Anthony DeMartino - ADM

Original Article Translation: Janna, ChainCatcher

This year, digital asset treasury companies, as typical representatives of the trend of coin and stock integration, have developed rapidly. However, such treasury-type companies have also exposed certain vulnerabilities while providing liquidity to mainstream assets such as Bitcoin and Ethereum. This article is sourced from Anthony DeMartino, Founder of Sentora and General Partner at the venture capital firm Istari, analyzing the potential risks behind the prosperity of DATs. ChainCatcher has compiled and translated the content without altering the original intent for readers' reference, but please note that this article does not constitute any investment advice.

The following is the original text:

By 2025, a new type of publicly traded company has attracted widespread investor attention: Digital Asset Treasuries (DATs). These entities typically hold core reserve assets in cryptocurrencies such as Bitcoin and have raised over $15 billion in funding in just this year, surpassing the size of traditional venture capital in the crypto space. This trend was initially pioneered by companies like MicroStrategy and has gained momentum, with more and more enterprises accumulating digital assets through public markets. Although this strategy has brought substantial returns during bullish market periods, it also carries inherent risks that could lead to a painful liquidation cascade, further exacerbating market volatility in both equities and crypto markets.

(I) Operating Model of DATs

The establishment of DATs usually relies on innovative financing structures, including entering Nasdaq through reverse mergers with listed shells. This approach allows private entities to quickly go public without undergoing the rigorous scrutiny of a traditional IPO. For example, in May 2025, Asset Entities and Strive Asset Management established a treasury company focused on Bitcoin through a reverse merger.

Other cases include Twenty One Capital, backed by SoftBank and Tether, creating a $3.6 billion Bitcoin investment vehicle through a reverse merger with Cantor Equity Partners. After these companies go public, they raise funds through stock offerings and allocate almost all raised funds into digital assets. Their core mission is clear: to purchase and hold cryptocurrencies such as Bitcoin, Ethereum, SOL, XRP, and even TON.

This model realizes the cross-over integration of traditional finance and cryptocurrency, providing investors with an investment vehicle that allows for "leverage exposure" without directly holding the assets.

(2) Stock Price Surge and Premium Trading

During a crypto bull market, DATs' stocks often experience significant surges, with a notable premium compared to their Net Asset Value (NAV). As the benchmark enterprise for this model, MicroStrategy's stock price has seen premiums of over 50% relative to its Bitcoin NAV, with its multiple NAV (mNAV) ratio recently reaching 1.56.

This premium formation is driven by multiple factors: first, these companies can access low-cost public market funds; second, investors' enthusiasm for leveraging bets on cryptocurrency; and third, the market views these companies as a vehicle to amplify stock returns.

When the stock price exceeds NAV, the dilution effect on shareholders for every $1 raised is lower than the value increment brought by asset purchases, thus creating a virtuous cycle. By 2025, publicly listed companies and investors had cumulatively acquired over 157,000 bitcoins (valued at over $16 billion), further propelling this trend. Stocks of companies like Metaplanet, Bitmine, SharpLink have all experienced significant surges, often surpassing the price gains of their underlying cryptocurrencies.

(3) Leveraging: Adding Fuel to the Fire

With the premium persisting, DATs often leverage to amplify returns. They issue convertible bonds or additional shares to purchase more digital assets, essentially borrowing against future appreciation. For example, MicroStrategy extensively utilizes convertible notes, with its debt scale accounting for 11% of its Bitcoin NAV.

This strategy magnifies returns in an uptrend but exposes the companies to significant risks during market downturns. Leverage reduces a company's shock absorption capacity, potentially leading to margin call notifications or forced selling. Its attractiveness is evident: in a bull market, leverage can transform the moderate returns of cryptocurrency into an explosive performance of stocks. However, the inherent high volatility of digital assets may lead to rapid asset devaluation.

(4) Inevitable Downturn: From Premium to Discount

The high volatility of the crypto market is well-known, and when cryptocurrency prices fall, DATs' stock prices may experience larger declines. If the price drop is too rapid, or market confidence in these companies weakens, the premium of stock price to NAV may quickly turn into a discount. Leveraged positions will further exacerbate this issue: a drop in NAV will force the company to de-risk, creating a volatility trap where the bets that originally amplified returns will instead cause greater losses to holders.

A stock trading at a discount to NAV implies that the market doubts the company's asset management ability or operational expense coverage during an asset value decline. Without intervention measures, a chain reaction may occur: loss of investor confidence, rising borrowing costs, and a potential liquidity crisis.

(V) Choices in Crisis: Three Forward Paths

Assuming a given Digital Asset Trust (DAT) has sufficient cash reserves to cover operating expenses, when the stock trades at a discount, it mainly faces three choices:

1. Maintain the status quo: The company continues to hold assets, waiting for a market rebound. This approach allows for the retention of cryptocurrency holdings but may lead to long-term shareholder dissatisfaction, further exacerbating stock price declines. To date, Strategy Company has persisted in holding Bitcoin through multiple bear markets.

2. Peer acquisition: If the discount widens significantly, some speculative buyers (typically other DATs) may acquire the company at a low price, essentially purchasing its underlying tokens below market value. This would drive industry consolidation but also prematurely release demand, weakening new buy-side flows, which is one of the core drivers of the current bull market.

3. Asset sale for stock buyback: The board of directors may sell some digital assets to repurchase stock, narrowing the discount and restoring stock price to NAV parity. This approach allows for active management of premium and discount dynamics, but fundamentally involves selling cryptocurrency in a soft market.

These three choices highlight the delicate balance between asset preservation and shareholder value.

(VI) Selling Pressure: Motivation and Impact

DAT decision-makers typically receive stock as their primary form of compensation. While this aligns their interests with stock performance, it also leads them to prefer short-term solutions. Because individual wealth is directly tied to stock prices, when the stock trades at a discount, the board faces immense pressure to choose a strategy that combines asset sale with stock buybacks.

This incentive structure may cause companies to prioritize short-term NAV parity over adhering to a long-term holding strategy, leading to hasty decisions that contradict the logic of the original asset reserves. Critics argue that this mechanism is similar to historical "boom to bust" asset cycles, where leveraged bets ultimately collapse in a brutal manner. If multiple companies simultaneously choose this strategy, it could trigger a chain reaction, leading to broader market turbulence.

(VII) Widespread Impact on Cryptocurrency Prices

The process of DAT stock transitioning from a premium to a discount may have a profound impact on underlying cryptocurrency prices, often leading to a negative feedback loop: when companies sell tokens for stock buybacks or leverage coverage, they inject additional supply into an already declining market, further exacerbating price declines. For example, banking industry analysis warns that if the Bitcoin price falls more than 22% below the company's average purchase price, it may trigger forced selling.

This will trigger systemic risk: the behavior of large holders will impact market dynamics, amplify volatility, and may lead to a chain reaction of liquidations. However, some data indicates that corporate holdings have a minimal direct price impact, and the market may be overestimating the influence of digital asset treasury companies.

Nevertheless, in a high-leverage ecosystem, coordinated selling could still further depress asset values, hinder new entrants, and prolong bearish market cycles. As the Digital Asset Treasury (DAT) trend matures, its unwinding could stress test the resilience of the entire crypto market, turning today’s reserve asset boom into a future cautionary tale.

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

Since early 2025, DATs focusing on Ethereum have become significant players in the crypto ecosystem. Through public market fundraising, they have accumulated substantial Ethereum (ETH) holdings. While this has driven Ethereum's price up during bull markets, this pattern introduces additional risk in bear markets: when DATs' share price transitions from a premium NAV to a discount NAV, the board will face pressure to sell Ethereum to fund share buybacks or cover operational expenses, potentially exacerbating Ethereum's price decline. The following analysis will combine historical background, current holdings, and market dynamics to assess Ethereum's potential price floor in such scenarios.

(9) Historical Background: Price Trends around the First Ethereum DAT Announcement

The first DAT announcement focusing on Ethereum was made by BioNexus Gene Lab Corporation on March 5, 2025, marking the Nasdaq-listed company's official transition to an Ethereum asset strategy firm. Prior to this, on March 4, 2025, Ethereum's closing price was around $2170, reflecting the market's consolidation phase in widespread uncertainty post the 2024 bull run.

As of August 21, 2025, Ethereum's price was around $4240, representing an approximately 95% increase from the pre-announcement price. In comparison, Bitcoin (BTC) saw a 28% increase during the same period. Additionally, the ETH/BTC exchange rate hit a 2025 high point (exceeding 0.037), highlighting Ethereum's outperformance.

This Ethereum surge was driven by multiple factors, including inflows into spot Ethereum ETFs (over $9.4 billion since June), rising institutional adoption, and the corporate buying associated with the DAT trend itself. However, a significant portion of this rally was fueled by speculative inflows linked to the DAT narrative, making it prone to pullbacks.

（10）Corporate Ethereum Holdings and Supply Share Since the DAT Trend Initiation

Following BioNexus's announcement kickstarting the Ethereum DAT trend, publicly listed companies began actively accumulating Ethereum as a reserve asset. As of August 2025, approximately 69 entities hold over 4.1 million Ethereum, valued at around $17.6 billion. Key participants include: BitMine Immersion Technologies (holding value of $6.6 billion as of August 18, a market leader), SharpLink (728,804 ETH), ETHZilla (approximately 82,186 ETH), Coinbase, and Bit Digital.

These corporate holdings represent over 3% of the total Ethereum supply. As the Ethereum DAT trend began in March 2025, prior to this, hardly any public companies held Ethereum as a reserve asset, with Coinbase, for example, mainly using its Ethereum holdings for operations rather than as a strategic reserve. This 3.4% holding is largely the incremental acquisition post the DAT trend initiation. When considering institutional and ETF holdings, the institutionalized Ethereum holding stands at about 8.3% of the total supply, but the recent accumulation's core driver remains the enterprise buying related to DAT.

（11）DAT Stock Price Discount and Ethereum Price Decline Prediction

During a bull market, DAT stock prices typically carry a premium over NAV; however, in a bear market, this premium may reverse into a discount of 20%-50%, triggering three response paths: maintaining the status quo, acquisition, or asset sale for stock buyback. Due to executive compensation tied to stocks, they are more inclined to reduce the discount by selling Ethereum, injecting additional supply into the market. This selling pressure could form a negative feedback loop for Ethereum, especially considering the concentrated Ethereum holdings by a few companies.

1. Base Case Scenario (Mild Discount, Partial Sell-off)

If Ethereum enters a correction phase due to macro factors (e.g., rising interest rates) and DAT stock prices fall to a 10%-20% discount, companies may sell 5%-10% of their Ethereum holdings (approximately 205,000 - 410,000 ETH, valued at $0.87 billion - $1.74 billion at current prices) to raise buyback funds. Ethereum's daily trading volume is around $15 billion - $20 billion, so this sell-off may introduce 5%-10% downward pressure, pushing the price to $3,600-$3,800 (a 10%-15% drop from the current $4,240). This scenario assumes companies conduct gradual off-exchange (OTC) sales to minimize slippage.

2. Severe Scenario (Deep Discount, Coordinated Sell-off)

If the crypto market enters a full-blown bear market (premium completely disappears, discount widens to 30%-50%), multiple Digital Asset Treasuries (DATs) may simultaneously initiate liquidation—especially when leveraged positions (such as convertible bonds) force them to de-risk. If within a few weeks, 20%-30% of corporate Ethereum holdings (approximately 820,000 - 1,230,000 ETH, worth $3.5 billion - $5.2 billion) flood the market, it may exceed the market’s liquidity capacity, leading to a price drop of 25%-40%. At that time, the Ethereum price could plummet to $2,500-$3,000, nearing the level before the DAT trend began, but it won't fully retract—thanks to ETF funding support and on-chain growth (for example, early August saw Ethereum's average daily transaction volume reach 1.74 million). Referencing historical cases of institutional sell-offs amplifying price declines in the 2022 bear market, considering the current 3.4% corporate holdings concentration, Ethereum's volatility may further intensify.

3. Worst-case Scenario (Total Liquidation)

If regulatory scrutiny intensifies (such as the U.S. SEC taking action against treasury-centric companies) or a liquidity crisis erupts, forcing corporations to sell off Ethereum on a large scale (potentially selling more than 50% of holdings, i.e., over 2 million ETH), the price could crash to $1,800-$2,200, completely erasing the gains made after the DAT trend began and testing the 2025 low. However, the probability of this scenario is low, reasons being: M&A activity among peers may absorb some supply, and the 8% of ETF holdings out of total supply could also offer some cushion.

The above forecasts have factored in improvements in Ethereum's fundamentals, such as a whale accumulation of 200,000 ETH in Q2 2025, but they still highlight specific risks related to DATs. Ultimately, the extent of Ethereum price decline depends on the scale of sell-offs, market depth, and external catalysts, but in a discount-driven liquidation scenario, a price drop to the range of $2,500-$3,500 is reasonable, exposing the vulnerability of the DAT model.

Disclaimer

The content of this article does not represent the views of ChainCatcher. The opinions, data, and conclusions in this article represent the individual standpoints of the original author or interviewees; the translating party maintains a neutral stance and does not endorse their accuracy. It does not constitute advice or guidance in any professional field, and readers should exercise independent judgment when using it cautiously. This translation activity is limited to the purpose of sharing knowledge only. Readers are strictly advised to comply with local laws and regulations and refrain from engaging in any illegal financial activities.