Recent developments in the financial landscape have sparked significant debate around the sustainability of crypto treasury strategies. Various companies and investors have been diving headfirst into this trend, which has raised concerns about potential market overexposure and the possibility of a bubble.
In July, Bitmine Immersion announced a new Ethereum treasury initiative, leading to an astonishing 3,000% surge in its stock price within just five days after Tom Lee, a well-known market permabull from Fundstrat, joined its board. Shortly after, a lesser-known vape company reported an 800% spike in shares following its decision to embark on a Binance Coin (BNB) treasury strategy. September saw a European soccer investment firm declaring plans to accumulate Solana tokens, resulting in a 400% stock increase. Meanwhile, Eightco Holdings’ shares skyrocketed 5,600% due to its announcement to stockpile Worldcoin, which is associated with the controversial eyeball-scanning project founded by OpenAI CEO Sam Altman, with Wedbush analyst Dan Ives joining its board.
This frenzy mirrors a trend that dates back to 2017 when a non-crypto company added “blockchain” to its name and witnessed a 500% spike in stock. Experts like Mike Novogratz cautioned that the trend might be losing steam by August, yet companies continued announcing new treasury plans. The aim for many of these firms appears to replicate the success of Michael Saylor’s business software company, which adopted a Bitcoin-focused strategy in 2020, yielding favorable results for its share price.
Currently, there are 172 publicly traded companies employing Bitcoin holding strategies, with 48 emerging in just the last quarter, according to reports from Cointelegraph. Many of these firms were previously trading at low values and integrated crypto without a robust understanding of the digital asset market. This reliance on crypto as a potential safety net raised red flags for some analysts, including Chris Brodersen from Eisner Advisory Group. He likened the situation to the late 1990s dot-com bubble when many small stocks surged merely by associating with the internet, ultimately disappointing investors.
Brodersen emphasized the importance for investors to critically evaluate a company’s genuine strategy for entering the digital asset space. Concerns voiced by Andrew Duca, founder of the crypto tax platform Awaken Tax, suggest the bubble may already be forming, characterizing many of these strategies as superficial. According to Duca, “Most digital asset treasuries aren’t actually running on-chain businesses—they’re just buying tokens and calling it ‘strategy,'” which he argues is a classic precursor to market bubbles.
As major cryptocurrencies like Bitcoin and Ethereum have started trending downwards, fears about the sustainability of crypto treasuries have escalated. Duca observed that companies might be compelled to sell their assets, which could further exacerbate the decline and erode investor confidence. He noted that many treasury strategies appear to be mere speculative bets lacking real business rationale.
Looking ahead, industry experts warn that if a bubble were to burst, it would likely reveal companies that turned to crypto treasury strategies purely as a desperate measure rather than from an authentic strategic interest in digital assets. The fallout could severely impact investors who entered the fray without a clear understanding of the underlying financial health of these businesses. Chris Kline, COO and cofounder of BitcoinIRA, expressed concern that the exposure of these companies’ flawed strategies could result in significant losses for uninformed investors who bought into the burgeoning treasury craze.
