Crypto Treasury Firms and Market Stability: The Risks of Institutional Adoption and Forced Selling Dynamics

The rise of digital asset treasury firms (DATs) has been one of the most defining trends in institutional crypto adoption over the past decade. These firms, which hold significant portions of their balance sheets in cryptocurrencies like Bitcoin, have attracted billions in capital by promising exposure to the asset class while leveraging innovative financing structures. However, as 2025 draws to a close, cracks in this model are becoming impossible to ignore. From forced selling triggered by debt covenants to regulatory headwinds, the structural vulnerabilities of DATs are threatening not just their survival but the broader stability of crypto markets.

DATs raised $42.7 billion in 2025 alone to acquire crypto assets, often relying on convertible notes and private investment in public equity (PIPE) deals to fund their operations. These financing structures, while effective in bull markets, create significant risks when prices decline. For example, many DATs now face debt obligations that require them to maintain certain asset-to-debt ratios. When Bitcoin's price dipped in late 2025, firms with underwater positions were forced to sell assets to meet covenants or repurchase shares, exacerbating downward price pressure. This dynamic created a self-fulfilling prophecy: falling prices trigger selling, which further depresses prices.

According to analysts, the potential scale of this problem became starkly clear in December 2025 when MSCI proposed excluding DATs from its Global Investable Market Indexes. This move could trigger $10 billion to $15 billion in forced selling across 39 companies holding $113 billion in combined float-adjusted market capitalization. Such a sell-off would not only hurt DATs but also ripple through the broader market, as liquidity dries up and market makers struggle to absorb the volume. This is not hypothetical-similar forced selling events in 2022 and 2023 contributed to sharp, volatile price swings that eroded investor confidence.

Compounding these risks are broader market dynamics. China's crackdown on Bitcoin mining, for instance, led to an 8% decline in global hash rate, forcing miners to offload assets to stay liquid. Meanwhile, DATs like Strategy and Metaplanet-whose balance sheets are heavily concentrated in Bitcoin- have seen steep unrealized losses and eroding investor trust. To avoid collapse, these firms have resorted to issuing new shares or building U.S. dollar reserves, but such measures often dilute existing shareholders or deepen leverage. Analysts warn that if crypto prices remain under pressure, the DAT model could face systemic challenges, particularly if equity premiums shrink or debt costs rise.

The survival of DATs hinges on disciplined capital management and transparency. Firms that overextended themselves during the 2024-2025 bull run now find themselves in a precarious position, with limited options to service debt without triggering further selling. This fragility highlights a critical flaw in institutional crypto adoption: the assumption that perpetual price appreciation would insulate these firms from traditional financial risks. As markets normalize, the lack of downside protection in DATs' business models is becoming a liability.

For investors, the lesson is clear: DATs are not immune to the laws of capital preservation. While they have played a pivotal role in legitimizing crypto as an asset class, their reliance on leverage and opaque financing structures creates systemic risks that could destabilize markets during downturns. The coming months will test whether these firms can adapt or if they will become cautionary tales of overleveraging in a volatile sector.