By Hannah Lang

Feb 5 (Reuters) - Turbulence in the cryptocurrency market is dragging down shares of companies that hold bitcoin and other digital assets on their balance sheets, sparking concerns over potential broader strains in the sector.

The number of publicly traded companies investing in cryptocurrencies in the hope they would appreciate boomed last year.

Many were buoyed by U.S. President Donald Trump's crypto-friendly stance and inspired by the meteoric success of billionaire Michael Saylor's Strategy MSTR.O, which started out as software company MicroStrategy and began buying and holding ​bitcoin in 2020.

However, concerns over the valuations of artificial intelligence companies and uncertainty over the path of U.S. Federal Reserve rate cuts are weighing on risk assets, pushing bitcoin to its lowest level since November 2024 and sending many "digital asset treasury" or DAT companies wobbling.

Shares in Strategy, the best known of these bitcoin buyers, have fallen from $457 in July to as low as $111.27 on Thursday, the lowest since August 2024. Strategy was last trading down more than 11% on the day.

Strategy did not immediately respond to a request for comment.

In December, Strategy slashed its 2025 earnings forecast, citing a weak run in bitcoin, and announced plans to create a reserve to support dividend payments. The company said it expected to report earnings between a $6.3 billion profit and $5.5 billion loss for the full year, compared to its previous forecast of a net profit of $24 billion.

Shares of the UK's Smarter Web Company SWC.L, another bitcoin buyer, were also hard-hit on Thursday, down nearly 18%. Rival bitcoin buyers Nakamoto Inc NAKA.O and Japan's Metaplanet 3350.T fell almost 9% and more than 7%, respectively.

Bitcoin is down nearly 20% since the start of the year, with selling pressure intensifying after Trump nominated Kevin Warsh as the next Fed chair, which analysts have said could lead to a smaller Fed balance sheet - a negative for risk assets like cryptocurrencies.

Bitcoin has wiped out all of its gains since the election of Trump, who pledged on the campaign trail to overhaul policies toward digital assets. The world's biggest cryptocurrency was last trading at $67,651.

“As Bitcoin continues its slide below the psychological barrier of $70,000, it’s clear the crypto market is now in full capitulation mode," said Nic Puckrin, investment analyst and co-founder of crypto analysis platform Coin Bureau.

"If previous cycles are anything to go by, this is no longer a short-term correction, but rather a transition... and these typically take months, not weeks."

COMPANIES STOCKPILING OTHER TOKENS ALSO SLIDE

While institutional investors can buy tokens directly, DATs offer the chance to leverage returns and let more cautious investors gain crypto exposure through regulated public firms.

Still, sustained pressure on the shares of crypto treasury companies could complicate the ability of these firms to raise additional capital to buy more crypto tokens, the crux of their business model.

Many executives at such firms say their success will be rooted in their ability to make smart investing decisions and are looking for new ways to boost shareholder value, Reuters previously reported.

Companies stockpiling other crypto tokens were also trading lower on Thursday. Alt5 Sigma, a company that announced last year it would stockpile the Trump family's WLFI token, was down 8.4%. SharpLink Gaming, which holds ether, was down 8%, while Forward Industries, which holds solana, was down nearly 6%.

(Reporting by Hannah Lang in New York; Editing by Nia Williams)

((Hannah.Lang@thomsonreuters.com;))