Assessing the Structural Viability of Crypto Treasury Companies

The story of the digital asset treasury (DAT) model is a classic tale of a self-reinforcing cycle that has now broken down. For much of 2025, the mechanics were straightforward and powerful. Companies could issue new shares at a premium to the value of their underlying Bitcoin or Ether holdings. The proceeds from these sales were then used to buy more crypto, which in turn increased the asset base and justified further premium issuance. This flywheel effect allowed scores of firms to rapidly scale, with nearly 200 public companies now collectively holding over a million Bitcoin. The strategy's pioneer, Strategy, even traded at more than double its Bitcoin value last year.

But that playbook only works when the market assigns a premium. The collapse of Grayscale's premium and the subsequent discount for its successor, GBTC, set a clear precedent for the current widespread mispricing. As macro analyst Alex Kruger notes, the current situation mirrors the Grayscale collapse five years ago, where a new, more efficient product-Bitcoin ETFs-rendered the old, premium-priced vehicle obsolete. The DAT model, in its purest form, is now facing a similar structural challenge.

The shift from premium to discount is no longer a temporary market correction. It is a fundamental breakdown in the value creation story. The data is stark: at least 37 of the top 100 Bitcoin treasury companies now trade at discounts to their net asset value. That's nearly 40% of the major players, with discounts ranging from 17% to over 60%. The broader market context underscores the severity of the correction, with Bitcoin down approximately 30% from its all-time high and Ether down about 35% from recent peaks.

The mechanics of the cycle have reversed. Companies trading below their net asset value cannot raise capital without destroying shareholder value. The initial hype is over, and the entire trade began to slump in October. For the first three-quarters of 2025, treasury companies enjoyed significant premiums, but every other treasury underperformed the S&P 500 in that period. The model's collapse is a structural failure, not a cyclical dip.

The Core Value Creation Problem

The structural flaw in the digital asset treasury model is now brutally clear. It is a strategy built on a single, unsustainable premise: that hype alone can generate perpetual value. That era has ended, and the model cannot be replicated.

CEO Mike Novogratz of Galaxy Digital captured the new reality. He argued that without a clear plan to create value beyond simply owning crypto, these companies will continue to trade at a steep discount to their net asset value. He said they will trade between 80% and 95% of NAV unless management "turns them into companies." The core of his critique is that shareholder value cannot be extracted from passive asset holding. The playbook of hyping investors into bidding up the stock and selling at a premium-what he called the "hype and sell" trade-worked for a few pioneers like Michael Saylor and Tom Lee, but "It worked for nobody else."

This is the fundamental breakdown. The model offered no mechanism to close the discount gap. As macro analyst Alex Kruger put it, the entire structure is an "abomination". When a company trades below its net asset value, issuing new shares to buy more crypto destroys shareholder value. The capital raised is diluted across a shrinking market cap, leaving owners with a larger asset base but no proportional increase in equity value. This dynamic has already "ended access to capital markets", killing the flywheel that fueled the 2025 boom.

The bottom line is that the model failed to answer the most basic question of corporate finance: what does the company actually do? It offered a narrative of crypto ownership, but not a business. Without a strategy to leverage that ownership into earnings, innovation, or a competitive moat, the enterprise is reduced to a glorified exchange-traded fund. And in a market that now values efficiency and utility over mere exposure, that is a fatal flaw.

Financial and Regulatory Headwinds

The structural challenges facing digital asset treasury companies are now compounded by a dual headwind of financial constraint and regulatory uncertainty. The two forces interact in a way that stifles growth and delays the clarity needed for a market reset.

Financially, the situation is a classic vicious cycle. Companies trading below their net asset value cannot raise capital through equity issuance without destroying shareholder value. The trend that became the biggest boom of 2025 is starting the new year as a bust, with at least 37 of the top 100 Bitcoin treasury companies now trading at discounts to their net asset value. This dynamic has already "ended access to capital markets", killing the flywheel that fueled the sector's 2025 expansion. The model's collapse is a direct result of this financial impossibility: the strategy of selling shares at a premium to buy more crypto is dead when the premium is gone.

Regulatory developments, meanwhile, are creating a more competitive environment for banks but offering little immediate relief for the treasury sector. The tone at major agencies has shifted from risk-aversion to competitiveness. The Office of the Comptroller of the Currency (OCC) confirmed banks can engage in crypto-related activities incidental to banking, and the FDIC has withdrawn prior statements limiting such activities. This facilitates broader bank engagement with digital assets, which could eventually benefit the ecosystem. However, the most critical framework for the entire market-comprehensive market structure legislation-faces significant delays. U.S. crypto market structure legislation could be delayed to 2027, with final rules potentially taking effect in 2029.

This regulatory lag is a major source of uncertainty. While agencies are clarifying rules for stablecoins and payments, the overarching legislative patchwork that would define custody, trading, and corporate governance for digital asset firms remains unresolved. The delay is driven by political dynamics, with Democratic demands for conflict-of-interest restrictions affecting senior officials, including President Trump creating a key sticking point. The result is a prolonged period of ambiguity. For treasury companies, this means they must navigate a volatile financial environment-where capital raising is impossible-while waiting for a regulatory framework that may not arrive for years. The financial constraint limits their ability to adapt, while the regulatory uncertainty delays the very clarity that could allow a new model to emerge.

Pathways to Value Realization and Key Risks

The path forward for digital asset treasury companies is narrow and fraught with tension. The primary catalyst for a valuation reset lies in regulatory action, specifically the implementation of the GENIUS Act. This legislation, which prohibits stablecoins from paying interest or yield, aims to curb the competitive threat stablecoins pose to traditional banking. If enforced, it could restrict the yield that some crypto firms currently offer, altering the competitive landscape. For treasury companies, this regulatory clarity could be a double-edged sword. On one hand, it may stabilize the broader ecosystem. On the other, it could eliminate a key source of yield that some firms have used to support their valuations, adding another layer of uncertainty.

For any value realization to occur, the sector must fundamentally shift from a passive holding strategy to an active operating model. The current discounts are a direct result of the lack of a clear plan to create value beyond owning crypto. Success would require a pivot to strategies like yield generation and share buybacks. These moves could help support valuations by demonstrating a more active use of capital. However, they introduce significant new risks. Yield generation often involves leverage and market timing, while buybacks require a sustained commitment of capital and can be executed at poor prices if the market remains depressed. As the evidence notes, these mechanisms introduce leverage, liquidity, and execution risks that were absent in the simple "buy and hold" model.

The primary risk, therefore, is that the current valuation becomes a long-term value trap rather than a temporary opportunity. History shows discounts can create outsized long-term returns, but only if a company has a credible path to close the gap. The evidence highlights that most DATs lack a clear mechanism to close the gap, meaning mispricings can persist or worsen. The financial constraint-companies trading below net asset value cannot raise capital without destroying shareholder value-severely limits their ability to execute any new strategy. The regulatory catalysts could create new opportunities, but the fundamental model must change to capture them. Without that shift, the sector risks becoming a stagnant collection of discounted assets, unable to generate the earnings or growth needed to justify a return to premium pricing.