"The 'digital currency treasury model' is collapsing."

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The craze for companies holding digital currencies as treasury assets is cooling rapidly.

According to media statistics, the pace at which US-listed companies are purchasing Bitcoin has continued to slow down in recent months, dropping in September to its lowest level since April. Market analysts attribute this trend to an oversupply of related companies’ stocks, as well as investors’ concerns about the sustainability of this business model.

Some digital currency treasury concept stocks have plunged more than 50% since announcing their plans. One quarter of related listed companies have seen their stock prices fall below the value of their digital asset holdings, and some companies are facing regulatory scrutiny. In contrast, the Russell 2000 index, which represents small-cap stocks, rose by 12% in the third quarter.

This development has a direct impact on the digital asset market and related investors, meaning that the Bitcoin bull market driven by corporate treasury demand may be losing momentum.

Treasury Strategy Craze Cooling Rapidly

Corporate Bitcoin purchasing data shows a marked decline in market enthusiasm. According to bitcointreasuries.net, companies bought 37,881 Bitcoins in September, a sharp drop from 49,303 in August and 103,250 in July.

This strategy initially heated up rapidly after Trump publicly voiced support for the digital asset industry. Within months, dozens of companies announced they were shifting focus from traditional businesses like biotechnology and agricultural equipment to investing in Bitcoin and other digital currencies.

But the situation has now reversed. Data from K33 Research shows that one quarter of listed companies using a Bitcoin treasury strategy have seen their stock prices fall below the total value of their digital token holdings. When a company’s stock price falls below the value of its token holdings, it affects its ability to issue new shares to raise funds to buy more digital assets.

Strategy (formerly MicroStrategy), a pioneer of this strategy, is similarly facing valuation pressure. The company’s stock fell 20% in the third quarter and now trades at only 1.5 times the value of its Bitcoin holdings, down sharply from a peak of over 3 times.

Bankers and market analysts attribute this predicament to the oversupply of stocks privately issued by digital currency treasury companies to investors. These companies have used the same strategy to finance digital asset purchases, but the market is unable to absorb such a large supply all at once.

Jerry Serowik, Head of Capital Markets at Cohen & Co., said:

The market cannot absorb an unlimited number of such companies. We expect new share issuances to slow, and then capital markets will focus on the now-listed companies to help them raise incremental capital to scale up.

Mergers and Acquisitions Becoming a Solution

Faced with market saturation, the industry has begun looking for consolidation solutions.

Last week, asset management firm Strive, co-founded by former presidential candidate Vivek Ramaswamy, announced the acquisition of Semler Scientific, a former medical device company that joined the Bitcoin treasury craze in May 2024.

Strive’s stock has a premium relative to its Bitcoin holdings, while Semler’s does not. After the merger, the two companies will jointly hold more than 10,900 Bitcoins. Market data show that investors are more willing to pay a premium for shares in larger digital currency companies.

Wall Street bankers expect more deals between well-capitalized firms and smaller struggling companies, which will help squeeze out excess stock supply from the market. Serowik noted:

If you look at which companies have the highest trading multiples, it’s usually those with the largest Bitcoin reserves and the right management teams. The M&A market will become another channel for these companies to acquire more Bitcoin.

Risk Warning and DisclaimerThe market is risky, and investment requires caution. This article does not constitute personal investment advice and does not take into account the individual investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at your own risk. ```