Crypto-Treasury Companies and the Rising Risks of Liquidity and Volatility

The digital asset treasury (DAT) model has long been a cornerstone of crypto investing, offering exposure to Bitcoin, Ethereum, and other tokens through companies that hold these assets on their balance sheets. However, as speculative tokens dominate and valuations increasingly trade below net asset value (NAV), the structural vulnerabilities of the DAT model are coming into sharp focus. From liquidity constraints to volatile capital structures, the sustainability of these firms is now under intense scrutiny.

Structural Fragility: The Reflexive Growth Loop

The DAT model relies on a self-reinforcing cycle: companies issue equity at premiums to NAV, use the proceeds to buy more tokens, and boost token-per-share ownership for existing investors. This dynamic works well in bullish markets but falters when premiums compress or credit conditions tighten. For example, convertible debt maturities for many DATs cluster in 2027 and 2028, creating a potential liquidity crunch if refinancing becomes difficult, as noted in a Medium analysis.

Bitcoin-based DATs face an additional hurdle: the absence of native yield. While Ethereum-based counterparts can generate returns through staking and DeFi strategies, Bitcoin holders must rely solely on price appreciation. This lack of diversification leaves them exposed to prolonged downturns. As one analyst noted, "Companies that fail to innovate beyond token accumulation remain vulnerable to market shocks," according to the Medium analysis.

Valuation Challenges: Below NAV and Shareholder Dilution

As of late 2025, at least 15 Bitcoin-focused DATs are trading below NAV, according to data from The Block, as reported in a Reuters article. This trend reflects a shift from optimism to caution, as investors demand higher risk premiums for holding volatile assets. For instance, Strategy, a high-profile DAT, saw investors lose approximately $17 billion in value, according to the Reuters article.

To fund token purchases, many DATs have turned to private placements and PIPEs (private investment in public equity), raising over $15 billion collectively since April 2025, as reported in the Reuters article. However, these private sales often involve discounted share prices, leading to dilution and increased volatility. During market stress events-such as renewed U.S.-China tariff tensions in October 2025-companies like BitMine (ether-focused) and Forward Industries (Solana-focused) experienced sharp declines, as reported in the Reuters article.

Speculative Tokens: A Double-Edged Sword

DATs expanding into speculative tokens like XRP, Solana, and fringe altcoins are amplifying risks. According to Moody's Ratings' Cristiano Ventricelli, these moves expose investors to heightened volatility, particularly during downturns, as reported in the Reuters article. For example, Evernorth, an XRP-focused treasury firm, reported $78 million in losses on its holdings, while BitMine faces $2.1 billion in paper losses on its 3.4 million ETH stash, as noted in a Yahoo Finance report.

Some DATs are attempting to counteract these risks. ETHZilla and Forward Industries have approved share repurchases to stabilize prices, while SUI Group is exploring stablecoin issuance to diversify revenue streams, as reported in the Reuters article. Yet, these efforts remain reactive rather than transformative.

Pathways to Sustainability

For DATs to endure, they must move beyond token accumulation and embrace yield-generating strategies. BTCS Inc., for instance, has leveraged Aave's DeFi platform to borrow stablecoins at 5-6% interest, using Ethereum as collateral to acquire more ETH and stake it for returns, as described in a Blockchain News report. This approach demonstrates how DeFi tools can enhance treasury management by offering liquidity, transparency, and 24/7 accessibility, as described in the Blockchain News report.

However, innovation alone is not enough. Management teams must also prioritize capital structure optimization, reduce reliance on speculative tokens, and diversify into revenue-generating activities. As the market matures, only those DATs that adapt will survive the next downturn.

Conclusion

The DAT model is at a crossroads. While it offers unique exposure to crypto markets, its structural fragility-exacerbated by speculative tokens and below-NV valuations-poses significant risks. Investors must weigh these challenges carefully, favoring firms with robust capital structures, yield strategies, and a clear path to operational diversification. In a world where liquidity and volatility reign supreme, sustainability will belong to the adaptable, not the complacent.