Buying shares in crypto-holding companies has stopped working as an easy play to profit from market growth. Bitcoin collapsed more than 45% from its peaks, dragging the corporate sector down with it. These securities previously traded at a hefty premium to the value of the assets on their balance sheets. Now the pendulum has swung back: the market is pricing these companies at a discount.
Evaporation of the Speculative Premium
On Thursday, Bitcoin broke through the $70,000 mark, sliding to lows not seen since October 2024. Ether also hit new lows, reverting to May 2025 prices. The stock market reacted harshly: the median return for shares of US and Canadian companies with crypto treasuries (DAT) has dropped 17% year-to-date. The S&P 500 index rose 5% over the same period.
By February 5, Bitcoin was already trading at $65,500.
Michael Lebowitz of RIA Advisors is certain this was a classic bubble. According to him, we have seen wave after wave since 2020: meme stocks, tokens, SPACs. Crypto-holding companies simply became the latest chapter in this story. The bubble inflated specifically within the premium to asset prices, and now that premium has vanished.
Investors Demand Real Yield
B. Riley Securities analyst Fedor Shabalin believes the brief surge of euphoria is over. The market has realized that to justify a markup over the underlying asset, a company must generate additional profit. Merely holding Bitcoin is no longer sufficient.
The problem is that Bitcoin itself yields no interest income. Yet, the debt many firms took on to acquire it requires servicing. Against a backdrop of falling stock prices, this creates a dangerous predicament. What previously seemed unthinkable has become reality: holders are turning into sellers.
Reserve Sell-Offs and Default Risks
Examples are already emerging. Empery Digital began selling Bitcoin on Monday to finance a buyback of its devalued stock. Meanwhile, ETHZilla, backed by Peter Thiel, sold tokens worth $74.5 M back in December to settle debts.
Even the pioneer of this model, Strategy, has lost its former luster. The market previously awarded their shares a double valuation compared to the Bitcoin on their books. Now that premium has compressed to 9%. The company’s stock has slumped 26% since the start of the year. Canaccord Genuity analysts have already slashed their price target by 61%, expecting the company to report multibillion-dollar paper losses in Q4.
Major players like Strategy may still weather the storm thanks to strong balance sheets. Smaller firms have not been as fortunate. Many leveraged debt to buy crypto, and at current rates, they face default. Analysts believe the only exit path is acquisition. Vivek Ramaswamy’s Strive set the trend in 2025 when it agreed to acquire competitor Semler Scientific Inc.
Lebowitz from RIA Advisors is unsurprised by this finale. He summarizes the situation simply: if you want to own Bitcoin, buy Bitcoin.
This post is for informational purposes only and does not constitute advertising or investment advice. Please do your own research before making any decisions.