As companies focused on hoarding Bitcoin and other major cryptocurrencies struggle amid market saturation and bearish sentiment, new entrants are turning to lesser-known tokens, raising concerns about heightened volatility.
The surge in publicly traded companies seeking asset growth through crypto investments has been fueled by former U.S. President Donald Trump’s crypto-friendly stance and the remarkable success of Michael Saylor’s MicroStrategy.
According to an analysis by DLA Piper, at least 200 digital asset custodians (DATs)—mostly Bitcoin-centric—had a combined market cap of $150 billion by September, more than triple the figure from a year earlier.
A Reuters review of over 30 corporate filings shows that more firms, including penny-stock companies seeking profit growth, are entering the space daily. However, with Bitcoin prices declining, these firms are pivoting to niche, higher-volatility tokens for better returns.
**Investor Risks?** For instance, Greenlane, OceanPal, and Tharimmune recently announced plans to accumulate BERA, NEAR, and Canton Coin tokens, respectively. This trend signals deeper ties between the already volatile, speculative crypto sector and traditional markets, posing risks for investors.
"Digital asset custodians are gradually shifting toward more obscure, illiquid cryptocurrencies, which may carry higher risks," said Cristiano Ventricelli, VP and senior analyst at Moody’s Ratings’ digital assets division. He added, "Their equity will face greater pressure during market downturns."
**Volatility Spillover** Since April, many DATs have funded token purchases via private placements or PIPE (private investment in public equity) deals—selling shares directly to private investors, often at a discount.
Reuters found that between April and November, at least 40 DATs raised over $15 billion through PIPEs, with only five being Bitcoin-focused. October saw Bitcoin’s first monthly decline since 2018.
Major crypto investors involved in these deals include Winklevoss Capital, Galaxy Digital, Jump Crypto, Pantera Capital, Kraken, and DWF Labs. While some institutions buy tokens directly, DATs offer leveraged returns and regulated exposure for cautious investors.
Though PIPEs provide quick cash, analysts note that shareholder dilution and post-lockup resales often amplify stock volatility. Many DATs heavily reliant on such deals become particularly vulnerable during downturns.
This was evident on October 10, when U.S.-China tariff tensions triggered a market plunge. BitMine (holding Ether) fell over 11%, Forward Industries (invested in Solana) dropped 15%, and MicroStrategy slid nearly 5%.
"Interest in DATs has cooled since their debut, but a resurgence is possible," said Peter Chung, head of research at Presto Research.
OceanPal stated its NEAR token purchase lets shareholders benefit from AI integrations, while Greenlane declined to comment. MicroStrategy, BitMine, Tharimmune, and major investors did not immediately respond.
**Stocks Below NAV** Earlier this year, many DATs traded above their crypto holdings’ value, as investors bet on credit-fueled token buys. But with Bitcoin weakening and MicroStrategy copycats flooding the market, some firms faltered. The Block reported at least 15 Bitcoin custodians’ stocks traded below net asset value (NAV) last week.
Singapore’s 10x Research estimated retail investors—key buyers of MicroStrategy and other major DATs—lost roughly $17 billion on these trades.
Other DATs targeting mainstream tokens also face pressure. ETHZilla and Forward Industries recently approved stock buybacks, typically aimed at boosting shares.
"Most DATs will eventually trade below their digital asset holdings’ value," said Michael O’Rourke, JonesTrading’s chief market strategist.
**‘Total Implosion’** Standard Chartered analysts noted DATs hold 4% of Bitcoin, 3.1% of Ether, and 0.8% of Solana, meaning their operations could significantly impact token prices. They expect industry consolidation.
Forward Industries’ chairman Kyle Samani said buybacks offer "flexibility to return capital when shares are undervalued." DAT executives stress success hinges on smart investments.
"You’re betting on management to build value—that’s our focus," said Samani, also Multicoin Capital’s co-founder, which joined Forward’s September PIPE.
ETHZilla’s spokesperson said it eyes buybacks while trading below NAV, though its primary focus is blockchain-based traditional asset integration.
Other DATs explore new value-creation avenues. SUI Group’s chairman Marius Barnett said it recently launched a stablecoin, warning that DATs merely hoarding tokens "will totally implode long-term."