Crisis for Treasury Companies: Survival Mode Begins
A recent Galaxy Research analysis suggests that Bitcoin treasury businesses are about to enter a Darwinian phase. According to the research, their once-thriving business model’s fundamental mechanisms are starting to fail. According to the paper, equity prices dropped below Bitcoin’s net asset value (NAV), indicating that the digital asset treasury (DAT) transaction has hit its natural limit. This is making leverage a liability and reversing the issuance-driven growth loop.
When Bitcoin dropped from its October peak of about $126,000 to lows of about $80,000, it reached a breaking point. This steep drop reduced market liquidity and caused a reduction in risk appetite. The transition was expedited by the deleveraging event on October 10, which reduced spot depth and eliminated open interest in all futures markets.
For treasury companies whose equities had been serving as leveraged crypto trades, the shift has been intense. The same financial engineering that amplified upside has magnified downside.
Galaxy
DAT Stocks Plunge as Bitcoin Slips: Galaxy Warns of Major Risks
Most DAT stocks are currently trading at discounts after trading at large premiums to NAV during the summer. Even though Bitcoin is only down roughly 30% from its peak, this change has taken place. Businesses that formerly displayed hundreds of millions in unrealized gains, including Metaplanet and Nakamoto, are now deeply in the red. At the moment, their average Bitcoin buying price is over $107,000. According to Galaxy, these companies are subject to severe risk due to the leverage that is ingrained in them.
This price action resembles the kind of wipeouts seen in memecoin markets,
Galaxy
DAT Firms Face Three Possible Futures—Only One Offers Recovery
With issuance no longer available, Galaxy outlined three possible paths from here.
- The first scenario is a prolonged period of compressed premiums, during which BTC-per-share growth stagnates. In this environment, DAT equities may face even more downside risk than Bitcoin itself.
- The second outcome is consolidation. Companies that export heavily at high premiums, purchase BTC at prices close to the peak, or take on excessive debt begin to face pressure on their ability to pay. In this scenario, some of these companies may be acquired or forced to restructure.
- A third scenario allows for recovery if Bitcoin eventually reaches new all-time highs. However, this rebound would only benefit companies that preserved liquidity and avoided over-issuing during the boom.
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