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Bitcoin treasury companies are entering a “Darwinian phase” as the core mechanics of their once-booming business model break down, according to a new analysis from Galaxy Research.
The report said that the digital asset treasury (DAT) trade has reached its natural limit as equity prices fell below Bitcoin (BTC) net asset value (NAV), causing the issuance-driven growth loop to reverse and turning leverage into a liability.
That breaking point arrived as Bitcoin dropped from its October peak near $126,000 to lows around $80,000, triggering a sharp contraction in risk appetite and draining liquidity across the market. The October 10 deleveraging event accelerated the shift, wiping out open interest across futures markets and weakening spot depth.
“For treasury companies whose equities had been serving as leveraged crypto trades, the shift has been intense,” Galaxy said, adding that the “same financial engineering that amplified upside has magnified downside.”
Related: Cantor slashes Strategy target by 60%, tells clients forced-sale fears are overblown
DAT stocks flip to discounts
DAT stocks that traded at rich premiums to NAV over the summer are now mostly at discounts, even as Bitcoin itself is down only around 30% from highs. Companies such as Metaplanet and Nakamoto, which previously showed hundreds of millions in unrealized gains, are now deep in the red as average BTC purchase prices sit above $107,000.
Galaxy noted that the leverage embedded in these firms is exposing them to extreme downside, with one firm, NAKA, plunging more than 98% from its peak. “This price action resembles the kind of wipeouts seen in memecoin markets,” the firm wrote.
Metaplanet’s unrealized PnL reaches $530 million. Source: Galaxy
With issuance no longer available, Galaxy outlined three possible paths from here. The base case is a prolonged period of compressed premiums, during which BTC-per-share growth stagnates and DAT equities offer more downside than Bitcoin itself.
A second outcome is consolidation, when firms that issued heavily at high premiums, bought BTC near the top, or loaded up on debt, face solvency pressure and may be acquired or restructured. A third scenario leaves room for recovery if Bitcoin eventually reaches new all-time highs, but only for companies that preserved liquidity and avoided over-issuing during the boom.
Related: Can the biggest Bitcoin whales really decide when the market turns green or red?
Strategy raises $1.44 billion to quell dividend fears
On Friday, Strategy CEO Phong Le said the company’s new $1.44 billion cash reserve was created to calm investor anxiety over its ability to meet dividend and debt obligations during Bitcoin’s downturn. Funded through a stock sale, the reserve is designed to secure at least 12 months of dividend payments, with plans to extend that buffer to 24 months.
Meanwhile, Bitwise chief investment officer Matt Hougan has said that Strategy won’t be forced to sell Bitcoin to stay afloat if its share price drops, and those who say otherwise are “just flat wrong.”
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