Splashing cold water, most Bitcoin treasury companies will face their doom.

Author: Decentralised.Co

Compiled by: Shenchao TechFlow

Strategy has built an asset reserve worth $70 billion by holding Bitcoin.

Nowadays, every token project wants to become an asset reserve company.

The problem is: a quarter of the Bitcoin asset reserve companies have a market value that is already lower than the value of the assets they hold.

Here are the reasons why most companies fail.

Asset reserve companies have become one of the fastest-growing categories in the cryptocurrency space.

In just one year, their total asset value surged from 40 billion USD to 142 billion USD, almost equal to the total value locked (TVL) in the entire DeFi.

Nearly 90% of the assets are Bitcoin and Ethereum.

But this kind of “growth” mostly comes from the rise in the prices of Bitcoin and Ethereum, rather than from business cash flow or financial engineering.

Even this kind of growth is not evenly distributed.

Strategy holds nearly 63% of all publicly available Bitcoin. The remaining majority is controlled by the top six companies.

Outside of these giants, most digital asset reserve companies (DATs) are in a state of thin liquidity and fragile premiums, with their valuations fluctuating with market volatility rather than their own performance.

What is the reason?

When the market performs strongly, the stocks of asset reserve companies trade at a premium above their asset value. The reason for this premium is that they provide investors with compliant channels for investing in Bitcoin or Ethereum. Issuing new shares at this premium not only increases capital but also enhances the book value.

Each financing round increases more crypto assets, driving both the total asset volume and the stock price to rise. This creates a reflexive cycle: rising prices lead to value-added financing, financing funds are used to purchase more assets, and valuations climb until the premium disappears.

By mid-2025, this cycle is broken: the premium of Bitcoin reserve asset companies drops from 1.9 times to 1.3 times, while the asset reserve premium of Ethereum and SOL (Solana) plummets from 4.8 times to around 1.3 times within two months.

So, how has Strategy survived?

Because it not only built an asset reserve, but also created a financial instrument.

While most asset reserve companies continue to purchase more crypto assets by issuing stocks, Strategy raised $4 billion through convertible bonds and senior notes, with long-term loan rates of about 0.8%.

Its stock has become a high-beta version of Bitcoin. When the price of Bitcoin fluctuates by 1%, its stock price will slightly amplify the fluctuation in the same direction. By using debt to purchase Bitcoin, the Strategy amplifies each price movement, providing investors with a leveraged and compliant way to bet on Bitcoin without having to hold it directly.

This tradable volatility has attracted new investors: funds, ETFs, and even a debt market built around it.

Traders took advantage of the volatility of the Strategy to generate profits. Although their capital was locked before the maturity of the notes, they earned profits through the fluctuations in stock prices.

Due to the higher liquidity of Strategy stocks and their stronger volatility compared to Bitcoin, traders can profit without having to wait for the notes to mature.

Most new asset reserve companies have mimicked the Strategy model, but only replicated its simpler aspects.

They imitated the balance sheet but did not replicate the capital structure.

Strategy possesses convertible bonds, senior notes, and liquidity, which help it convert volatility into financing capability.

Other companies do not have such resources; they cannot raise capital and can only chase returns through staking, lending, or purchasing tokenized government bonds.

Using yield to replace real financing seems to work well when prices are rising. The yield remains high, and liquidity appears strong, which gives the impression that the model is effective.

But this obscures the reflexive risks similar to equity.

Most digital asset reserve companies (DATs) lock assets in staking or lending to earn returns while allowing investors to enter and exit freely.

When the market cycle reverses, redemption demand increases, and yields decline, they are forced to sell those locked assets at a loss.

This is exactly what is happening right now.

As market confidence weakens, the stock premiums that once traded at 3-4 times asset value have collapsed to be on par with asset value.

Even those “yield-driven” asset reserve companies based on Ethereum (ETH) or Solana (SOL) are not immune to the impact, as their solvency is still closely related to token prices.