Crypto‑treasury stocks, which rallied when companies stuffed their balance sheets with Bitcoin and ether, are sinking after recent price drops.
For much of the year, investors were selling shares or borrowing funds to buy crypto, betting that corporate treasuries loaded with tokens would outperform holding the coins directly.
Now that Bitcoin and Ether have fallen, those same stocks are falling harder. Some investors are smugly saying they saw this coming, while others are doubling down like nothing changed.
Michael Saylor set the model back in 2020 when he reshaped a small software company, then known as MicroStrategy, into a major crypto holder now operating as Strategy.
When Bitcoin rallied earlier this year, Strategy’s valuation climbed to about $128 billion in July. Today, it is closer to $70 billion.
The collapse in value is also affecting the many companies that copied Strategy’s move, as well as investors who chased the hype. Well‑known venture capitalist Peter Thiel backed many of these companies and is now taking losses alongside everyday traders who followed charismatic promoters.
Stocks fall as crypto slide spreads
Saylor has stayed optimistic in public messages, saying Bitcoin is “on sale.” But critics who questioned the logic of paying premiums for these companies are now being heard. Brent Donnelly, president of Spectra Markets, said:
“The whole concept makes no sense to me. You are just paying $2 for a one‑dollar bill. Eventually those premiums will compress.”
Many traders expected exactly this outcome, since these companies were often priced above the actual value of their crypto holdings.
When these companies first appeared, large institutional investors used them as a workaround to get exposure to crypto. But in the past two years, crypto exchange‑traded funds have made that workaround unnecessary.
As a result, the original appeal of crypto‑treasury stocks is weakening. BitMine Immersion Technologies, a major ether‑treasury play backed by Thiel and run by longtime Wall Street strategist Tom Lee, is down more than 30% over the past month.
ETHZilla, a former biotech company that shifted into ether accumulation and also counts Thiel as an investor, is down 23% over the same period.
Crypto prices rose earlier this year, helped by favorable sentiment under the Trump administration. That rise fueled additional demand for crypto‑treasury companies.
But the rally came to a halt on October 10, when a surprise tariff announcement against China triggered selling pressure. A record‑length government shutdown and uncertainty over Federal Reserve policy also added strain.
Bitcoin has fallen 15% in the past month. Strategy is down 26%. Matthew Tuttle’s ETF MSTU, which targets twice the daily move of Strategy, is down 50%.
Investors unwind trades while others stay committed
Investor Jimmy Chanos, who closed his hedge funds in 2023 but still trades privately, had been shorting Strategy while buying Bitcoin. He told clients on Friday that he is now closing that position.
Jimmy said crypto‑treasury stocks are still priced above the value of their holdings, but not at the extreme levels seen earlier. “The thesis has largely played out,” he wrote.
Some companies still hold enough reserves to avoid immediate trouble. Others may struggle to raise cash to buy more tokens, which could put more pressure on crypto prices.
Matt Cole, CEO of Strive, said, “A lot of them are stuck.” Strive bought Bitcoin at prices more than 10% above current levels, and its shares are down 28% this month. Cole said Strive can “ride out the volatility” because it raised funds using preferred shares instead of debt.
Not everyone is backing away. Cole Grinde, a 29‑year‑old investor in Seattle, put about $100,000 into BitMine at $45 a share earlier this year. He is down about $10,000 but says he is adding more. He sells BitMine options to offset some losses.
Cole said Tom Lee’s background and influence made him confident. “I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said.