By Adam Clark

The boom in companies holding large stocks of cryptos has been a hot play this year, but that trade is now at risk of imploding and dragging down the rest of the sector with it.

The public companies, known as crypto-treasury stocks, have been pouring funds into cryptocurrencies, but now that strategy faces its first real test as stock and token prices plunge.

Hoarding digital currencies was in vogue in the early part of 2025. The success of Strategy, helmed by Michael Saylor, led hundreds of public companies to follow its lead and add crypto tokens as a "treasury" asset. The company, formerly called MicroStrategy, currently holds more than 3% of the world's Bitcoin.

Companies' stocks surged immediately after announcing plans to buy up cryptocurrencies, but have since fallen back. 180 Life Sciences more than quintupled when it began buying Ethereum and rebranded as ETHZilla. Eightco soared 3,000% in a single day on plans to amass Worldcoin.

Investments by listed corporations topped $100 billion, according to Galaxy Research, helping drive crypto's total market value to a record of more than $4 trillion.

But the surge is waning. More than a quarter of the public companies that adopted a Bitcoin treasury strategy now have a market capitalization below the total value of their digital-token holdings, according to K33 Research.

That's a potential death blow. On the way up, crypto-treasury companies benefit from a virtuous circle -- companies sell shares at a premium to their asset value, using that to acquire more tokens that then rise in value, driving higher share prices, and so on. But when share-price premiums disappear, new investors have little reason to buy stock instead of the token itself. Companies may then need to sell assets to cover costs or debt, triggering a downward spiral.

"In a market where rivals can clone the [crypto-treasury] model overnight and exchange-traded funds offer cheaper, cleaner exposure, the idea that a rich premium can endure was always a fantasy," wrote analysts at investment manager Kerrisdale Capital in a report this month.

Kerrisdale disclosed a short position in BitMine Immersion Technologies, which has more than three million Ethereum tokens and is valued at around $14 billion. Short-sellers typically aim to profit from a fall in a stock price. Kerrisdale previously said it was short on Strategy. It didn't respond to a Barron's request asking whether it maintained those positions.

Even within the crypto sector, skepticism is growing. BitMine CEO Tom Lee said the "bubble has burst," on a Fortune podcast last week.

"You shouldn't be rewarded for doing something easy," Matthew Hougan, chief investment officer at Bitwise Asset Management, told Barron's at the European Blockchain Convention $(EBC)$.

"A company that just followed the MicroStrategy [sic] playbook of buying Bitcoin and putting it in a box shouldn't trade at a premium to their Bitcoin. It should trade at a discount."

Falling valuations of smaller crypto-treasury stocks such as CleanCore Solutions -- down more than 80% since starting to buy meme coin Dogecoin -- have little wider impact. But drops for bigger holders such as Japan's Metaplanet, a top-five publicly listed Bitcoin holder that is down 65% in three months and now trades below its net asset value, could matter more if they are forced to sell their assets.

The biggest player is Strategy, with more than 640,000 Bitcoin -- almost all of its $82 billion market cap. Barron's wrote skeptically about the stock last December. Since then, Strategy's stock is down 25% and its premium has shrunk: its enterprise value to Bitcoin ratio is now about 1.4, down from more than 2.

A shrinking share price is one thing, but a falling asset value could compound the problems. Bitcoin surged to more than $124,000 earlier this month but dropped sharply when President Donald Trump threatened new tariffs on imports from China. It now trades just over $110,400.

For believers, such crashes are minor setbacks. Standard Chartered's Head of Digital Assets Geoffrey Kendrick predicts the price of the world's largest crypto will reach $500,000 by 2028, pointing to gains in gold.

"I see Bitcoin and gold as having a similar rationale," Kendrick told Barron's in an interview at EBC. "The global asset market is probably well and truly underweight Bitcoin."

Strategy's average purchase price is about $74,000 a Bitcoin, giving it a profit cushion. It has issued $14.8 billion in debt and preferred stock, but its holdings cover that. A sustained downturn could force it to suspend dividends or pause buying. Some worry about its reliance on convertible debt that must be repaid in cash if the stock lags at maturity -- though that's years away.

"Just imagine MicroStrategy [sic] exits Bitcoin. I can't imagine the price the next day but people will cry," said Standard Chartered's digital assets product director Emilie Allaert, in a panel discussion at EBC.

Strategy didn't respond to Barron's requests for comment.

The crypto-treasury wave has been a powerful catalyst for the sector in general but we are about to find out what happens when it recedes. At their simplest, such stocks act as a levered bet on the direction of the particular token they have decided to amass. And when prices go into reverse, leverage inevitably magnifies the pain.

Write to Adam Clark at adam.clark@barrons.com

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October 25, 2025 02:30 ET (06:30 GMT)

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