The Hidden Sellers Driving Bitcoin's Collapse: How Leveraged DATCos Are Amplifying the Downturn

Bitcoin's 2025 price collapse has exposed a critical but underappreciated driver of market instability: the systemic risks posed by leveraged Digital Asset Treasury Companies (DATCos). These entities, designed to bridge institutional capital and crypto markets, have become both beneficiaries and accelerants of Bitcoin's volatility. By leveraging capital-raising tools like At-the-Market (ATM) equity programs, Private Investments in Public Equity (PIPEs), and perpetual preferred equity structures, DATCos have created a fragile ecosystem where forced selling and liquidity spirals are increasingly routine.

The DATCo Model: A Double-Edged Sword

DATCos operate by raising capital through equity issuance and converting proceeds into Bitcoin, effectively acting as intermediaries for institutional investors barred from direct crypto ownership due to regulatory constraints according to research. Their leverage mechanisms, however, introduce inherent fragility. For example, ATMs allow companies to issue shares incrementally at market prices, creating a positive feedback loop when equity premiums exceed net asset value (NAV). Conversely, PIPEs-often used for rapid capital raising-come with steep discounts and dilution risks, as seen in Nakamoto's $51.5 million PIPE in June 2025. These tools, while effective in bullish cycles, become liabilities during downturns.

The introduction of perpetual preferred equity structures, such as Metaplanet's MERCURY shares, further complicates the picture. Offering a fixed 4.9% annual dividend and a liquidation preference of 1,000 yen per share, these instruments blend fixed-income characteristics with Bitcoin exposure. Yet, when Bitcoin prices decline, the need to service dividends or meet liquidation preferences forces DATCos to sell assets, exacerbating downward price pressure.

Forced Selling and Liquidity Spirals in 2025

The 2025 market environment has been a stress test for leveraged DATCos. In October and November, Bitcoin's sharp corrections triggered cascading margin calls and forced liquidations. For instance, a single day in late November saw $250 million in Bitcoin liquidations, with 70% of losses concentrated in long positions. These events were amplified by the widespread use of high-leverage derivatives (20x–100x) and structured products on platforms like Coinbase and Cboe, where a 2% price drop could trigger full liquidations.

DATCos, reliant on thin capital buffers and concentrated Bitcoin holdings, became key participants in this cycle. As their market-to-NAV (mNAV) gaps widened, managers resorted to selling crypto to meet liquidity demands, further depressing prices in already illiquid markets. This self-reinforcing dynamic-where selling begets more selling-was evident in late 2025, when Bitcoin's price fell below $87,500 amid $5 billion in weekly liquidations.

Case Studies: Strategy and the Retail Exodus

Strategy (MSTR), a major Bitcoin treasury company, exemplifies the risks of passive, leveraged exposure. Its share price plummeted nearly 60% over four months in 2025 as Bitcoin volatility eroded its value. Despite continued Bitcoin purchases, MSTR's lack of hedging strategies or alternative revenue streams left it vulnerable to forced selling. Similarly, retail investors withdrew $4 billion from Bitcoin and Ethereum ETFs in November 2025, according to JPMorgan, compounding downward pressure. While retail outflows dominated headlines, institutional DATCos-constrained by leverage and fixed obligations-played a more insidious role in amplifying the downturn.

Implications for Bitcoin's Stability

DATCos currently represent a small portion of the crypto market (0.83%), but their influence is disproportionate due to their leveraged structures and institutional backing according to research. The 2025 FASB accounting update, which allows crypto holdings to be marked to market, has further exposed DATCos to NAV-based valuation risks. When equity premiums collapse or capital markets freeze, these companies lose their ability to accumulate Bitcoin, triggering a market-wide unwind.

The broader lesson is clear: leveraged DATCos have created a system where Bitcoin's price is increasingly tied to the solvency of capital-raising mechanisms. As global trade tensions and macroeconomic shocks persist, the DATCo model's fragility will likely remain a wildcard for Bitcoin's stability.

Conclusion

The 2025 Bitcoin collapse underscores the need for investors to scrutinize the hidden mechanics driving crypto markets. Leveraged DATCos, with their reliance on debt, derivatives, and perpetual equity structures, have become both a symptom and a catalyst of systemic risk. While their role in democratizing institutional crypto exposure is undeniable, the liquidity spirals they enable during downturns pose a significant threat to Bitcoin's long-term resilience. As the market evolves, the question is no longer whether DATCos matter-but how regulators and investors can mitigate their destabilizing influence.