What began the year as one of the best trades in the stock market has, in a matter of months, turned into one of the worst.
An array of public companies thought they had found a sort of perpetual motion machine: Use your corporate cash to buy up Bitcoin or other digital tokens and presto, your share price shot up even more than the value of the tokens you bought.
It was a playbook invented by Michael Saylor, who transformed his company, Strategy Inc., into a publicly traded Bitcoin holding vehicle. And through the first half of 2025 it worked for more than a hundred other companies that followed Saylor’s lead.
Digital asset treasuries, as these firms became known, turned into one of the hottest trends in the public markets, as share prices skyrocketed and everyone from Peter Thiel to the Trump family piled in.
One prominent entrant, SharpLink Gaming Inc., soared over 2,600% in a matter of days as the company said it would pivot from its old work in gaming, and sell shares to buy up lots and lots of Ethereum tokens, with one of Ethereum’s co-founders as the chairman.
But it was always hard to explain why tokens should be worth more just because they were held by a public company, and the wheels began to come off the car, at first slowly and then much more quickly.
In the case of SharpLink, the stock has fallen 86% from its peak, leaving the whole company worth less than the digital tokens it owns. The company now trades at roughly 0.9 times its Ether holdings. It was, at least, spared the fate of Greenlane Holdings, which plunged more than 99% this year, despite its stash of around $48 million BERA crypto tokens.
“Investors took a look and understood that there’s not much yield from these holdings rather than just sitting on this pile of money, and that’s why they contracted,” B. Riley Securities Analyst Fedor Shabalin said in an interview.
Among the US and Canadian-listed companies that became DATs, the median stock price has fallen 43% this year, according to data compiled by Bloomberg. Bitcoin, by comparison, is down around just 6% since the beginning of the year.
Some lucky DATs are still worth more than their underlying holdings, but most have been losers for people who bought them when they were anywhere near their peaks and 70% are on track to end the year below where they began it, according to Bloomberg’s calculations.
The worst performers have been public companies that eschewed Bitcoin and went for smaller, more volatile tokens.
Two of President Donald Trump’s sons lined up behind Alt5 Sigma Corp., a public company that set out to buy over a billion dollars of WLFI, a token issued by a separate company that was co-founded by the Trump family. Those shares have fallen about 86% from their peak in June.
The volatility of these stocks is explained, at least in part, by all the money that was borrowed to pay for the corporate crypto acquisitions.
Strategy came up with a remarkable array of convertible bonds and preferred shares that funded the company’s Bitcoin purchases, with the tokens growing to be worth over $70 billion at one point. DATs as a group raised over $45 billion this year to purchase crypto tokens, according to Shabalin at B. Riley.
Now, though, Strategy and all the other companies are on the hook to make the interest and dividend payments on that debt. That is a problem because their crypto holdings, for the most part, don’t generate any cash flow.
“If you own Strategy, you own the Bitcoin risk plus whatever kind of corporate stress, corporate risk they are taking on,” RIA Advisors Portfolio Manager Michael Lebowitz said in an interview.
Strategy has recently tried to raise more capital to keep the flywheel spinning, turning to Europe in November to sell perpetual preferred stocks at a discount, after US preferred shares sales fell short of expectations. But those euro-denominated preferred stocks have already fallen below their offer price.
Meanwhile, for smaller DATs without name recognition, capital raising opportunities are even harder to come by as crypto prices decline and investor enthusiasm wanes.
For Strategy, the obvious next step is to sell some of its crypto holdings to pay the bills. And that is what Saylor’s chief executive officer, Phong Le, said the company might do.
“We can sell Bitcoin and we would sell Bitcoin if we needed to fund our dividend payments,” Le said on a podcast.
Le said he will look at this option if the company’s so-called mNAV falls below 1, a calculation that would suggest the company’s market value has fallen below the value of its crypto holdings.
These comments shook the DAT industry because Saylor had said many times that he would not sell his Bitcoin, and would buy more when the price went down.
“Sell a kidney if you must, but keep the Bitcoin,” he joked in a February post on X.
The big concern now is that DATs will be forced to sell their crypto, which will push down the prices of those tokens, setting off a downward spiral.
“If there’s a headline that says Strategy sold, even if it’s three Bitcoin, I think after everything Michael Saylor has said about he’s never selling a dime, people are going to start to question the whole Bitcoin trade,” Lebowitz said.
Strategy has created a $1.4 billion reserve fund to cover dividend payments in the near term. And shares are still up over 1,200% since it started buying Bitcoin in August 2020. But they are on track for a 38% decline this year.
The DAT wipeout risks bleeding into broader markets if traders are using borrowed money, which could force them to sell in order to cover margin calls. For now, the problems have largely cut off the flow of new companies adopting the strategy — and the burst of capital markets activity that it created.
But there are signs that there may be at least some new activity from somewhat more valuable DATs acquiring smaller DATs that are worth less than their holdings.
Strive Inc., co-founded by former Republican presidential candidate Vivek Ramaswamy, agreed to acquire Semler Scientific Inc. in an all-stock deal in September, merging the two Bitcoin treasury companies. Semler was one of the first DATs and has fallen 65% this year.
Ross Carmel, a partner at Sichenzia Ross Ference Carmel, expects that mergers and acquisitions will pick up for DATs in early 2026 with a focus on the potential for further pain.
The industry is likely to see more structured securities transactions “that can be used to give these investors more downside protection in these deals,” Carmel said.
Mulima writes for Bloomberg.
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