The situation in corporate crypto Treasuries is unprecedented as digital asset prices are in the midst of another sharp decline from their October highs. Those Treasuries that jumped on the bandwagon of supporting Bitcoin, Ethereum, and Solana in their digital asset functions are now caught in the worst possible storm of falling digital asset values and stock values, too. Together, the total digital asset Treasuries’ market cap has tumbled from July’s $176 billion to around $99 billion at present.
Corporate crypto holdings face massive value destruction
Digital asset treasury businesses are witnessing extreme drawdowns in both stock and digital asset values as the prices of Bitcoin, Ethereum, and Solana are trending lower from their recent peaks. Market capitalization of leading DAT companies in the public domain has dropped drastically, and this can be seen in the sharp decline reported in the data chart of The Block. Michael Saylor’s Strategy holds the highest number of bitcoins in its portfolio, containing 649,870 Bitcoins purchased at an average price of $74,433 per bitcoin for a total of $48.4 billion.
Strategy’s current positioning of about $54.5 billion still holds an unrealized gain of approximately $6.1 billion despite the sharp retreat in the values of Bitcoin. However, the stock for this company has drastically dropped in line with the falling values of cryptocurrencies in the markets. Strategy shares are down 34% in the past month and around 41% during the current year to end at $177.13. In light of MSCI and other large indexes planning to delist Strategy, JPMorgan had advised this week that the fund may witness billions of outflows.
Ethereum treasury positions experience underwater losses
Bitmine, the leading Ethereum-centric digital asset treasury manager, owns 3,559,879 ETH at an average of approximately $4,010 per token as reported previously. Given that ETH is currently trading near multi-month lows of around $2,745, it is now facing an unrealized loss of approximately $4.52 billion, or 31.7% of its Ethereum investment. ETH has plummeted by 30% in the past 30 days, while the stock has dropped 44% in the past month despite gaining 271% year-to-date.
Solana exposure adds to the portfolio stress
Forward Industries, which further consolidated its Solana play in January in a $4 billion equity offering, had about 6.83 million shares of SOL purchased at an average cost of $232. Additionally, SOL is down 32% in the last 30 days and is currently at around $127, incurring an unrealized loss of about 44.8% in the portfolio, taking into account the current worth of about $711 million. Although the stock is down 55% in the last month, it is still up 84% year to date.
Now, the pressure from the market has extended from portfolio drawdowns to actual reduction in treasury for at least one publicly-listed institution. FG Nexus sold over 10,000 ETH to partly fund share repurchases, making it the first large ETH holder and publicly-listed institution that has made such reductions in its Treasury during this cycle.
“There is going to be a fire sale at those companies. It is only going to get worse. It is a vicious cycle. Once the prices start falling, it is a race to the bottom,” said Adam Morgan McCarthy, senior research analyst at Kaiko.
Global crypto treasury companies face broad-based declines
The impetus for investment in the corporate world in crypto came from Saylor’s software company, and this encouraged other sectors, such as movies, e-cigarettes, and electric cars, to adopt the Bitcoin Treasury approach. The purchasing made in the corporate world helped push the Bitcoin markets to record levels last month, but this situation soon changed when the crypto markets became casualties in investment sell-offs this autumn.
The future of corporate cryptocurrency treasury practices remains clouded in uncertainty in light of escalating volatility in digital asset markets and unprecedented erosion in token and stock values. The sharp drop-off in token and stock prices underscores the risk posed by corporations’ diversification approaches that are too heavily invested in speculative markets.
Disclaimer: Our coverage of investments, retirement funding, and digital assets is not financial advice. We are not responsible for any investment decisions or financial losses resulting from the use of our content. All information is provided solely for educational and informational purposes.
