Companies holding Bitcoin treasuries are undergoing a “Darwinian phase” as the foundational elements of their previously thriving business models begin to collapse, according to a recent analysis from Galaxy Research.
The report indicates that the digital asset treasury (DAT) trade has hit its natural limit as equity values fell below Bitcoin (BTC) net asset value (NAV), reversing the growth cycle driven by issuance and turning leverage into a burden.
This tipping point was reached as Bitcoin fell from its October peak near $126,000 to lows around $80,000, leading to a significant reduction in risk appetite and a depletion of liquidity throughout the market. The deleveraging event on October 10 accelerated this transition, resulting in a loss of open interest across futures markets and diminishing spot depth.
“For treasury companies whose equities had been serving as leveraged crypto trades, the change has been drastic,” Galaxy noted, pointing out that the “same financial engineering that amplified gains has intensified losses.”
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DAT stocks shift to discounts
DAT stocks that previously traded at significant premiums to NAV during the summer are now largely trading at discounts, despite Bitcoin being down only about 30% from its peak. Firms like Metaplanet and Nakamoto, which once showcased unrealized gains worth hundreds of millions, are now facing substantial losses as average BTC acquisition prices exceed $107,000.
Galaxy observed that the inherent leverage in these companies is subjecting them to severe downturns, with one firm, NAKA, experiencing a drop exceeding 98% from its peak. “This price movement resembles the kind of crash observed in memecoin markets,” the firm stated.
With new issuance now unavailable, Galaxy identified three potential paths forward. The most likely scenario is a prolonged phase of narrowed premiums, during which BTC-per-share growth stagnates, causing DAT equities to present more downside than Bitcoin itself.
A second possibility is consolidation, where firms that issued extensively at high premiums, purchased BTC near the peak, or heavily borrowed face solvency challenges and may either be acquired or restructured. A third scenario allows for recovery if Bitcoin eventually sets new all-time highs, though this would only benefit companies that maintained liquidity and refrained from over-issuing during the boom phase.
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Strategy secures $1.44 billion to alleviate dividend concerns
On Friday, Strategy CEO Phong Le announced that the company’s newly created $1.44 billion cash reserve was established to ease investor concerns regarding its capacity to fulfill dividend and debt obligations amid Bitcoin’s downturn. Funded through a stock sale, the reserve aims to cover at least 12 months of dividend payouts, with plans to extend this cushion to 24 months.
Additionally, Bitwise Chief Investment Officer Matt Hougan stated that Strategy won’t be compelled to sell Bitcoin to remain solvent if its share price declines, asserting that claims to the contrary are “simply incorrect.”
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