(Bloomberg) — What started as one of the most promising investment opportunities in the stock market has rapidly transformed into one of its worst within just a few months. Numerous public companies believed they had discovered a reliable strategy: by using their corporate funds to acquire Bitcoin or other cryptocurrencies, they could significantly boost their stock prices, often surpassing the value of the digital assets they purchased.
### Evolution of a Trend
This strategy was popularized by Michael Saylor, who revolutionized his company, Strategy Inc., into a publicly traded entity primarily holding Bitcoin. Throughout the first half of 2025, this approach proved successful for over a hundred companies that followed Saylor’s example. Known as Digital Asset Treasuries (DATs), these firms became a significant trend in the public markets, witnessing soaring share prices as investors, including notable figures like Peter Thiel and members of the Trump family, eagerly participated.
One notable case was SharpLink Gaming Inc., which saw its stock surge more than 2,600% within days after announcing a strategic shift from gaming to investing heavily in Ethereum tokens, with one of Ethereum’s co-founders taking the role of chairman. However, the rationale behind why these tokens should command higher valuations simply due to their association with public companies was always tenuous. Eventually, the situation deteriorated, initially at a slow pace before accelerating rapidly.
### Decline in Value
SharpLink’s stock has plummeted by 86% from its peak, now trading at a valuation lower than the worth of its Ethereum holdings, with the company valued at approximately 0.9 times its Ether assets. In stark contrast, Greenlane Holdings suffered an even more drastic decline, plummeting over 99% this year despite holding around $48 million in BERA cryptocurrency tokens. “Investors realized that holding these assets yielded little more than simply having cash on hand, leading to a contraction in value,” explained B. Riley Securities Analyst Fedor Shabalin in a recent interview.
Among US and Canadian-listed companies that became DATs, the median stock price has dropped by 43% this year, while Bitcoin has only decreased about 6% since the year’s start. While some fortunate DATs still have valuations exceeding their underlying holdings, the majority have disappointed investors who bought in near their peak values, with around 70% projected to finish the year beneath their starting prices.
### The Impact of Volatility
The most significant losses have been observed in public firms that opted for smaller, more volatile tokens instead of Bitcoin. Notably, two of former President Donald Trump’s sons backed Alt5 Sigma Corp., which aimed to invest over a billion dollars into WLFI, a token co-founded by the Trump family. Those shares have also seen a decline of roughly 86% since their peak in June.
The volatility surrounding these stocks can be partly attributed to the substantial borrowing undertaken to finance corporate cryptocurrency acquisitions. Strategy utilized an impressive range of convertible bonds and preferred shares to fund its Bitcoin investments, which at one point were valued at over $70 billion. Collectively, DATs raised more than $45 billion this year to purchase crypto tokens, according to Shabalin. However, these companies now face the challenge of meeting interest and dividend obligations on the debt incurred, which is problematic since most of their crypto holdings do not generate cash flow.
### Future Risks and Strategies
As RIA Advisors Portfolio Manager Michael Lebowitz pointed out, owning shares in Strategy means absorbing both Bitcoin-related risks and the corporate financial strain the company is experiencing. Recently, Strategy has sought additional capital to sustain operations, turning to European markets in November to issue perpetual preferred stocks at a discount after failing to meet expectations in the US market. However, these euro-denominated preferred stocks have already fallen below their initial offering price.
For smaller DATs lacking brand recognition, securing capital has become increasingly challenging as crypto values decline and investor interest diminishes. Strategy’s logical next step may involve liquidating some of its crypto assets to cover expenses. Phong Le, the company’s CEO, indicated that selling Bitcoin might be necessary to fund dividend payments, a shift from Saylor’s previous stance of never selling his Bitcoin holdings.
This revelation has sent shockwaves through the DAT sector, especially given Saylor’s past comments about retaining Bitcoin at all costs. Analysts fear that if DATs are compelled to divest their crypto assets, it could lead to a further decline in digital asset prices, creating a vicious cycle. “If news breaks that Strategy sold even a small amount of Bitcoin, it could trigger doubts about the entire Bitcoin investment premise,” Lebowitz warned.
### The Broader Market Implications
Strategy has established a $1.4 billion reserve fund to manage upcoming dividend payments, and despite their stock being up over 1,200% since they began acquiring Bitcoin in August 2020, they are on track for a 38% decline this year. The fallout from the DAT crisis could spill over into broader markets, particularly if traders engaged in leveraged investments are forced to sell to meet margin calls.
Currently, these challenges have significantly curtailed the influx of new companies pursuing this strategy, along with the surge in capital market activities it once generated. However, there are indications of renewed activity, particularly as more financially stable DATs consider acquiring smaller, undervalued DATs. Notably, Strive Inc., co-founded by former Republican presidential candidate Vivek Ramaswamy, announced its agreement to acquire Semler Scientific Inc. in a stock transaction aimed at merging the two firms focused on Bitcoin treasury management.
With Semler being one of the earliest DATs and experiencing a 65% decline this year, Ross Carmel, a partner at Sichenzia Ross Ference Carmel, anticipates that mergers and acquisitions in the DAT sector will increase by early 2026 as the industry braves further challenges. He suggested that more structured securities transactions may emerge to provide investors with better downside protection in these arrangements.
