In a striking turn of events, companies that stockpile bitcoin and other cryptocurrencies have witnessed significant declines in their stock prices, marking a downturn in what has been regarded as a crypto frenzy that captivated investors earlier this year. These entities, often referred to as digital asset treasury companies, utilize share sales or debt issuance to gather capital aimed at acquiring cryptocurrencies that populate their balance sheets. The initial surge in share prices was largely fueled by bitcoin’s remarkable highs and positive endorsements from prominent figures, including U.S. President Donald Trump.
Recent reports indicate that at least 61 publicly traded companies, which are not primarily focused on digital assets, have started implementing bitcoin treasury strategies. One standout in this arena, known for its aggressive bitcoin buying, is led by Michael Saylor. However, even its stock has seen a dramatic fall, plummeting from a peak of $457 in July to as low as $328 this week. This represents a significant dip since earlier in the year, reducing total gains to just 13%.
Similarly, Japanese firm Metaplanet, which operates as a bitcoin treasury company, experienced a slump this week, hitting its lowest point since May. Although its stock is still up 105% year-to-date, it has suffered a decline of over 60% from its peak in June.
Smaller companies that pivoted suddenly to incorporating bitcoin into their strategies also faced losses. The volatility associated with these investments has raised alarms among analysts. Adam McCarthy from Kaiko noted that these companies are often set up for extreme fluctuations and leverage their investments heavily, leading to amplified losses when bitcoin’s value dips. McCarthy explained that this volatility often catches retail investors off-guard, compounding sell-off fears and exacerbating market declines.
The situation has become so acute that the market capitalization of some of these companies can fall below the actual crypto assets they hold. Analysts like Lale Akoner from eToro warn that many of these firms lack robust fundamental business models, leaving their valuations precariously dependent on the shifting sentiment surrounding cryptocurrencies.
For instance, Smarter Web Company, a UK-based website design firm, experienced a meteoric rise after announcing its bitcoin strategy in April but has since plummeted over 70% since June. Similarly, shares of Alt5 Sigma, despite a significant partnership with Trump’s World Liberty Financial, have witnessed a drastic reduction of more than 61% from their June highs.
Moreover, the inclination toward bitcoin accumulation is not limited to bitcoin alone; it has extended to other cryptocurrencies, including ether and various lesser-known tokens. McCarthy emphasized a critical understanding among retail investors that many of these companies aren’t genuinely engaged in buying crypto; rather, they are marketing a crypto narrative to bolster their equity value.
As the cryptocurrency market continues to see fluctuations, key players like BitMine and GameSquare, both backed by notable figures like Peter Thiel, have enjoyed high share valuations after announcing plans to acquire ether. However, both have suffered about a 67% drop since their peak in July.
In upcoming developments, crypto exchange Gemini is poised to launch on the Nasdaq, backed by Cameron Tyler Winklevoss. The firm has increased its proposed price range for its U.S. initial public offering, aiming for a valuation of up to $3.08 billion as anticipation builds around its market debut.
