Source: The Boom and Potential Bust of Digital Asset Treasury Companies: Which Tokens are Most Exposed?
Compilation & Translation: Janna, ChainCatcher
Since the beginning of this year, digital asset treasury companies have rapidly emerged as typical representatives in the wave of coin-stock integration. However, such treasury-type companies expose certain vulnerabilities while injecting liquidity into mainstream assets like Bitcoin and Ethereum. This article is based on an analysis by Anthony DeMartino, founder of Sentora and general partner at the venture capital firm Istari, regarding the potential risks behind the prosperity of the DAT sector. ChainCatcher has compiled and translated this without changing the original meaning for readers' reference, but it should be noted that this article does not constitute any investment advice.
The following is the original text:
In 2025, a new type of public company has garnered widespread attention from investors: Digital Asset Treasuries (DATs). These entities typically use cryptocurrencies like Bitcoin as core reserve assets and have raised over $15 billion in funding this year alone, exceeding the scale of traditional venture capital in the crypto space. This trend has been driven by companies like MicroStrategy and has gradually gained momentum, with more businesses accumulating digital assets through public markets. Although this strategy yields substantial returns during bull markets, it also carries inherent risks that could lead to painful liquidation waves, exacerbating volatility in both the stock and crypto markets.
(1) Operation Model of DATs
The establishment of DATs typically relies on innovative financing structures, including merging with NASDAQ-listed shell companies through reverse mergers. This method allows private entities to go public quickly without undergoing the rigorous scrutiny of a traditional IPO. For instance, in May 2025, Asset Entities merged with Strive Asset Management through a reverse merger to establish a Bitcoin-focused treasury company.
Other cases include: Twenty One Capital, supported by SoftBank and Tether, which created a Bitcoin investment vehicle worth $3.6 billion through a reverse merger with Cantor Equity Partners. After going public, these companies will raise funds through stock issuance and invest nearly all the raised funds into digital assets. Their core mission is very clear: to buy and hold cryptocurrencies such as Bitcoin, Ethereum, SOL, XRP, and even TON.
This model achieves a cross-integration of traditional finance and cryptocurrency, providing investors with an investment vehicle that offers 'leveraged exposure' without directly holding assets.
(2) Stock Price Increase and Premium Trading
During crypto bull markets, DATs' stocks often surge significantly and trade at a notable premium to their net asset value (NAV). As a benchmark company for this model, MicroStrategy's stock price was once more than 50% higher than its Bitcoin NAV, and recently its multiple NAV (mNAV) ratio reached 1.56.
The formation of this premium stems from multiple factors: first, these companies can access low-cost public market funds; second, investor enthusiasm for leveraged bets on cryptocurrencies; and third, the market views such companies as vehicles for amplifying stock returns.
When stock prices are above NAV, each dollar raised has a dilution effect on shareholders that is less than the value increment brought about by asset purchases, creating a virtuous cycle. In 2025, public companies and investors accumulated over 157,000 Bitcoins (worth over $16 billion), further driving this momentum. The stocks of companies like Metaplanet, Bitmine, and SharpLink have seen significant increases, often exceeding the price increases of the underlying cryptocurrencies.
(3) Leveraging: Adding Fuel to the Fire
As premiums persist, DATs typically leverage to amplify returns. They issue convertible bonds or increase stock issuance to purchase more digital assets, essentially borrowing against future appreciation. For example, MicroStrategy has widely used convertible notes, with its debt accounting for 11% of its Bitcoin NAV.
This strategy amplifies returns in uptrends but exposes companies to significant risks in downturns. Leverage can reduce a company's shock resistance, potentially triggering margin calls or forced liquidations. Its appeal is evident: in a rising market, leverage can turn moderate cryptocurrency gains into explosive stock performance. However, the inherent high volatility of digital assets can lead to rapid declines in asset value.
(4) Inevitable Decline: From Premium to Discount
The high volatility of the crypto market is well known; when cryptocurrency prices decline, the stock prices of DATs may fall even more. If the price drops too quickly or market confidence in such companies weakens, the stock price premium over NAV may quickly turn into a discount. Leveraged positions further exacerbate this issue: declines in NAV may force companies to de-risk, creating a volatility trap where the bets that originally amplified returns end up causing greater losses for holders.
The discount of stock price relative to NAV indicates the market's skepticism about the company's asset management ability or operational cost coverage during asset value declines. Without intervention, this can create a chain reaction: loss of investor confidence, rising borrowing costs, potential liquidity crisis.
(5) Choices in Crisis: Three Paths Forward
Assuming a DAT has sufficient cash reserves to cover operational costs, then when trading at a discount to stock price, it mainly faces three choices:
1. Maintain Status Quo: Companies continue to hold assets, waiting for a market rebound. This approach preserves cryptocurrency holdings but may lead to long-term shareholder dissatisfaction, further exacerbating stock price declines. So far, Strategy companies have resisted selling Bitcoin during 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 buying its underlying tokens below market value. This would drive industry consolidation but also prematurely release demand, weakening new buying flows, which is one of the core driving forces behind the current uptrend.
3. Sell Assets to Buy Back Stock: The company board may sell part of its digital assets to repurchase stock in order to narrow the discount and restore the stock price to be in line with NAV. This method allows for proactive management of premium and discount dynamics, but essentially involves selling cryptocurrencies in a weak market.
These three choices highlight the fragile balance between asset preservation and shareholder value.
(6) Selling Pressure: Motivation and Impact
Decision-makers at DATs typically use stock as their primary form of compensation. While this aligns their interests with stock price performance, it also leads them to favor short-term solutions. Since personal wealth is directly tied to stock prices, when stock prices experience a discount, the board faces immense pressure and tends to choose a strategy that combines selling assets and buying back stock.
This incentive structure may lead companies to prioritize short-term NAV stability over a long-term holding strategy, thus making hasty decisions that contradict the logic of original reserve assets. Critics argue that this mechanism is similar to historical asset cycles from 'prosperity to depression,' where leveraged bets ultimately collapse in a devastating manner. If multiple companies choose this strategy simultaneously, it could trigger a chain reaction, causing broader market turmoil.
(7) Broad Impact on Cryptocurrency Prices
The process of DATs' stock prices shifting from premium to discount can have profound effects on the underlying cryptocurrency prices and often creates a negative feedback loop: when companies sell tokens to buy back stock or cover leverage, it injects additional supply into an already declining market, further exacerbating price drops. For example, banking analysis warns that if Bitcoin prices fall more than 22% below the average purchase price for companies, it could trigger forced selling.
This could trigger systemic risks: the behavior of large holders can affect market dynamics, amplify volatility, and potentially lead to a chain liquidation. However, some data shows that corporate holdings have a relatively minor direct impact on prices, and the market may overestimate the influence of digital asset treasury companies.
Nevertheless, in a high-leverage environment, coordinated sell-offs may further depress asset values, hinder new players from entering, and extend the bear market cycle. As the DAT trend matures, the wave of liquidations may test the resilience of the entire crypto market, transforming today's reserve asset boom into future cautionary tales.
(8) Which Tokens Will Be Most Affected by the Discount Transformation?
Since the beginning of 2025, Ethereum-focused DATs have become significant players in the crypto ecosystem. They have raised substantial amounts of Ethereum (ETH) holdings through public market financing. Although this drives up Ethereum prices during bull markets, this model introduces additional risks during bear markets: when DATs' stock prices shift from premium NAV to discount NAV, the board will face pressure to sell Ethereum to fund stock buybacks or cover operational costs, which may further exacerbate the decline in Ethereum prices. The following will analyze the potential price bottom for Ethereum under such scenarios by combining historical background, current holdings, and market dynamics.
(9) Historical Context: Price Trends Before and After the First DAT Announcement for Ethereum
The first announcement focused on Ethereum was made by BioNexus Gene Lab Corporation on March 5, 2025, marking the formal transformation of this Nasdaq-listed company into an Ethereum asset strategy company. Prior to this, on March 4, 2025, the closing price of Ethereum was approximately $2170, reflecting the market's consolidation state amid widespread uncertainty following the 2024 bull market.
As of August 21, 2025, the price of Ethereum was approximately $4240, an increase of about 95% from the price before the announcement. In contrast, during the same period, BTC's increase was only 28%. Additionally, the ETH/BTC exchange rate also reached a 2025 high (over 0.037), highlighting Ethereum's outperformance.
The recent surge in Ethereum is driven by multiple factors, including inflows from spot Ethereum ETFs (over $9.4 billion since June), increased institutional adoption, and corporate purchases spurred by the DAT trend itself. However, a large portion of this increase is attributed to speculative inflows related to the DAT narrative, making it susceptible to corrections.
(10) Corporate Ethereum Holdings and Supply Share Since the Start of the DAT Trend
Since BioNexus's announcement initiated the Ethereum DAT wave, public companies have begun actively accumulating Ethereum as a reserve asset. As of August 2025, approximately 69 entities hold over 4.1 million Ethereum, valued at about $17.6 billion. Major participants include: BitMine Immersion Technologies (as of August 18, with a holding value of $6.6 billion, a leader in the industry), SharpLink (728,804 ETH), ETHZilla (approximately 82,186 ETH), Coinbase, and Bit Digital.
These companies hold over 3% of the total supply of Ethereum. Since the DAT trend began in March 2025, there have been few public companies that treated Ethereum as a reserve asset; for example, Coinbase's Ethereum holdings are mainly used for operations rather than as strategic reserves. This 3.4% holding is primarily from acquisitions made after the DAT trend started. When including institutional and ETF holdings, the institutional holding ratio of Ethereum is about 8.3% of the total supply, but the core driving force recently has still been corporate purchases related to DAT.
(11) Predictions for Ethereum Price Decline When DATs' Stock Prices Are at a Discount
During bull markets, DATs' stock prices tend to trade at a premium to NAV; however, during bear markets, the previous premium may reverse into a discount of 20%-50%, triggering three response paths: maintain status quo, be acquired, or sell assets to buy back stock. Since executive compensation is linked to stock performance, they are more inclined to sell Ethereum to narrow the discount, which injects additional supply into the market. For Ethereum, this selling may create a negative feedback loop, especially considering the concentrated holding characteristic of a few companies that own large amounts of Ethereum.
1. Benchmark Scenario (Mild Discount, Partial Sale)
If Ethereum enters a correction phase due to macroeconomic factors (such as rising interest rates) and the stock price of DATs falls to a 10%-20% discount, companies may sell 5%-10% of their Ethereum holdings (approximately 205,000 - 410,000 ETH, valued at $870 million - $1.74 billion at current prices) to raise funds for stock buybacks. The average daily trading volume of Ethereum is approximately $15 billion - $20 billion, so this portion of selling could bring 5%-10% downward pressure, pushing the price down to $3600-$3800 (a drop of 10%-15% from the current $4240). This scenario assumes companies gradually sell off through over-the-counter (OTC) transactions to minimize slippage.
2. Severe Scenario (Deep Discount, Coordinated Sell-off)
If the crypto market enters a full bear market (where premiums completely vanish and discounts expand to 30%-50%), multiple DATs may simultaneously initiate liquidations—especially when leveraged positions (like convertible bonds) compel them to de-risk. If 20%-30% of corporate Ethereum holdings (approximately 820,000 - 1.23 million ETH, valued at $3.5 billion - $5.2 billion) flood the market within weeks, it could exceed the market's liquidity capacity, leading to a price drop of 25%-40%. At that time, the price of Ethereum could fall to $2500-$3000, nearing the levels before the initiation of the DAT trend, but will not fully revert—thanks to the funding support from ETFs and on-chain growth (for example, Ethereum's average daily trading volume reached 1.74 million transactions in early August). Referring to historical cases during the 2022 bear market where institutional sell-offs amplified declines, and considering the current 3.4% concentration of corporate holdings, Ethereum's volatility could further increase.
3. Worst Scenario (Complete Liquidation)
If regulatory scrutiny intensifies (e.g., the U.S. SEC taking action against treasury-type companies) or a liquidity crisis breaks out, forcing companies to sell Ethereum on a large scale (potentially more than 50% of holdings, i.e., over 2 million ETH), the price could plummet to $1800-$2200, completely erasing the gains since the start of the DAT trend and testing the 2025 low. However, the probability of this scenario occurring is low for reasons including: peer acquisitions may absorb some supply, and the ETF holdings, accounting for 8% of total supply, can also provide some buffer.
The above predictions have taken into account improvements in Ethereum's fundamentals, such as the accumulation of 200,000 ETH by whales in the second quarter of 2025, but still highlight specific risks related to DATs. Ultimately, the degree to which Ethereum prices decline depends on the scale of sell-offs, market depth, and external catalytic factors, but in scenarios driven by discounts leading to liquidations, a price drop to the $2500-$3500 range is reasonable, exposing the fragility of the DAT model.
