Institutional Flight from Crypto: A Market Correction or a Structural Shift?

The crypto market's prolonged bear cycle has exposed deep fissures in the financial architecture of Digital Asset Treasuries (DATs), raising urgent questions about their long-term viability. As institutional investors retreat from volatile crypto assets, the sector faces a dual challenge: distinguishing between temporary market corrections and enduring structural shifts. This analysis examines the performance of DATs amid the 2023-2025 bear market, evaluates the implications of recent capital flows, and assesses whether the current turmoil signals a cyclical reset or a fundamental reordering of the crypto ecosystem.

The Bear Market's Toll on DATs

Digital Asset Treasuries, which hold crypto assets as their primary collateral while operating as publicly traded companies, have been hit hard by the sustained decline in crypto prices. According to a report by Decrypt, BitMine, Metaplanet, and SharpLink collectively hold $5.8 billion in unrealized losses from their crypto holdings as of Q4 2025. BitMine's Ethereum portfolio alone sits at a $4.44 billion loss, while its market-capitalization-to-net-asset-value (mNAV) ratio has fallen to 0.73x, indicating that its stock price trades at a 27% discount to the value of its underlying assets. Similar pressures are evident across the sector: SharpLink and Forward Industries trade at 0.82x and 0.74x mNAV, respectively.

This compression of mNAV ratios creates a self-reinforcing cycle. As stock prices fall below net asset value, DATs struggle to raise capital through equity offerings, forcing them to seek alternative liquidity sources or risk forced selling of their crypto holdings. Armando Aguilar of TeraHash warns that such scenarios could exacerbate downward pressure on crypto markets, creating a "self-reinforcing downward spiral." The risk is not hypothetical: experts note that sustained price declines could trigger widespread liquidations, further destabilizing the sector.

A Glimmer of Resilience: The Strategy Exception

Not all DATs are equally vulnerable. Strategy, the pioneering firm in the DAT model, remains an outlier, holding $7.48 billion in unrealized gains on its crypto holdings. This positions it to maintain dividend coverage for decades, even if Bitcoin prices stagnate. Such resilience underscores the importance of asset composition and risk management in determining a DAT's long-term viability. However, Strategy's success also highlights the fragility of the broader sector: while a few firms can weather the storm, the majority face existential threats when their mNAV ratios fall below 1.

Institutional Capital Flows: A Ray of Hope?

Amid the gloom, a recent development offers a counterpoint to the narrative of institutional flight. In October-November 2025, mF International Limited announced a $500.0 million private placement with accredited institutional investors to launch a digital asset treasury strategy. The proceeds will fund the acquisition of Bitcoin Cash and the establishment of a new DAT. This move suggests that, despite the bear market, some institutional investors still see value in the DAT model-provided they can structure it with tighter risk controls and clearer exit strategies.

However, this single transaction does not offset the broader trend. Most DATs remain trapped in a liquidity crunch, with their stock prices failing to reflect the intrinsic value of their crypto holdings. The mF International deal may represent a niche bet on the sector's eventual recovery, but it does not address the systemic challenges facing DATs.

Market Correction or Structural Shift?

The distinction between a market correction and a structural shift hinges on the root causes of the current turmoil. A correction implies that DATs are overcorrecting to temporary market conditions, with their long-term fundamentals intact. A structural shift, by contrast, suggests that the DAT model is inherently flawed in a bear market, where forced selling and capital-raising difficulties create irreversible damage.

The evidence leans toward the latter. The widespread compression of mNAV ratios and the risk of forced selling indicate that DATs are not merely reacting to price declines but are structurally ill-equipped to withstand prolonged bear markets. Their reliance on equity financing to maintain operations becomes untenable when stock prices fall below net asset value, creating a liquidity trap. This dynamic is not a temporary correction but a systemic vulnerability embedded in the DAT model itself.

Long-Term Viability: A Fork in the Road

For DATs to survive the current bear market, they must address two critical issues: liquidity and governance. Liquidity can be stabilized through diversified capital-raising strategies, such as debt financing or strategic partnerships, to avoid overreliance on equity dilution. Governance reforms, meanwhile, must prioritize transparency in asset valuation and risk management to restore investor confidence.

The recent mF International PIPE offers a blueprint for such reforms. By targeting accredited institutional investors and focusing on Bitcoin Cash-a less volatile asset compared to Bitcoin or Ethereum-the firm is hedging against the risks that have plagued other DATs. If more DATs adopt similar strategies, the sector could evolve into a more resilient asset class. However, this requires a fundamental rethinking of the DAT model, moving away from speculative crypto holdings toward diversified, liquid collateral.

Conclusion

The bear market has laid bare the fragility of Digital Asset Treasuries. While some firms, like Strategy, demonstrate the potential for long-term success, the broader sector is caught in a liquidity crisis that threatens its structural integrity. The recent influx of institutional capital into mF International suggests that the DAT model is not dead-but it is far from unscathed. For investors, the key question is whether DATs can adapt to a new reality where volatility is the norm and liquidity is the premium. The answer will determine whether this is a temporary correction or the beginning of a permanent shift in how crypto assets are managed and valued.