Digital Asset Treasury Firms: Still Supporting the Crypto Market?

Digital Asset Treasury Firms: Support or Risk for the Crypto Market?

In the frenzy of the crypto market, "Digital Asset Treasury" (DAT) firms have played a pivotal role, acting as an "unlimited ammunition depot," injecting vast amounts of capital from traditional markets into the crypto ecosystem through innovative financial instruments. However, with the market craze waning and recent downtrends persisting, these once "buyer" firms are facing significant challenges. Will they be able to continue supporting the market, or will their inherent structural risks turn them from a "blood pump" into a "time bomb," becoming an "accelerator" for magnifying the market downturn?

DAT Firm Stock Plunge and Sharp Decline in Asset Purchases

According to BBX data, there are currently 248 publicly listed crypto treasury companies, of which 187 hold Bitcoin, 42 hold Ethereum, and 20 hold SOL. As of November 6, the market capitalization of a significant number of DAT firms has fallen below their Net Asset Value (NAV). Among them, 15 Bitcoin-holding firms have an mNAV below 1, 5 Ethereum-holding firms have an mNAV below 1, and a total of 37 firms have an mNAV below 1, accounting for approximately 14.9% (mNAV = circulating market capitalization / value of the held currency), meaning that the market capitalization of approximately 85% of crypto treasury firms is larger than the size of their held crypto assets.

From a market capitalization perspective, companies holding Bitcoin as a reserve have the largest volume, holding assets totaling $417.8 billion USD. Therefore, the performance of these DAT enterprises is more representative. PANews analyzed the performance of 34 non-mining public companies holding more than 100 Bitcoins listed on SoSovalue over the past three months. Overall, the average rate of increase and decrease for these listed companies was -24.51% in the past three months, with only 5 companies achieving an increase in their stock prices within three months. The remainder were in a state of decline. The largest decline was for Next technology, with a three-month drop exceeding 95%.

Different Models of DAT Firms

There are three main models of DAT firms, each with its own potential risks:

• Model 1: Firms like Strategy (MSTR) that rely on perpetual accumulation of Bitcoin through the issuance of convertible notes.
• Model 2: Firms created through reverse mergers, which may be vulnerable to market fluctuations.
• Model 3: Firms with operating rules that include the sale of crypto assets.

Are DAT Firms an Upswing Accelerator or a Downward Spiral?

The question remains: Is the rise of DAT firms merely a temporary frenzy at the end of the bull market, or is it a potential long-term source of funding for the cryptocurrency industry? In the short term, these firms remain a relatively stable source of fresh blood for the crypto market, and they do not easily sell their held crypto assets except under extreme circumstances. However, due to the different motivations and design rules of these firms, they are also relatively unstable sources of funding. In a bull market, these firms are perfect "bull market accelerators." They use the leverage and regulatory advantages of traditional financial markets to continuously absorb funds, effectively driving the market upward. In a bear market, these firms may be forced to liquidate due to debt agreements, company regulations, and shareholder demands. Although the probability of this event occurring is small, once it does occur, it inevitably becomes a "death spiral" that magnifies systemic risks.

Of course, even in the face of the pessimistic sentiment prevailing in the current market, the objective reality is that the "black swan" has not yet arrived, and for the DAT treasury strategy business model, everything is still in its early stages, and the final result still needs to be tested by the market and time. Perhaps, the DAT firms that undergo this market correction will become a new driving force for growth in the next cycle.