Stock Market Turnaround: From Hype to Hurdles

(Bloomberg) — What began as an exhilarating trade in the stock market shifted dramatically, transforming into a disappointing outcome within a few months.

A number of publicly traded companies believed they had uncovered a revolutionary strategy. They invested their cash into Bitcoin and other digital currencies, resulting in stock prices that outpaced the value of the tokens they had purchased.

This approach was pioneered by Michael Saylor, who turned his company into a publicly traded entity focused on Bitcoin. By mid-2025, over 100 other companies followed his model.

These so-called digital asset vaults quickly became a trend in the markets, with stock prices climbing, attracting attention from high-profile investors like Peter Thiel and the Trump family.

A striking example is Sharplink Gaming, whose stock skyrocketed over 2,600% in just days after announcing the appointment of an Ethereum co-founder as chairman and pivoting its focus toward acquiring Ethereum tokens.

Yet, understanding the price appreciation of a token just because a company holds it has always been somewhat perplexing. Gradually, issues started to emerge, initially in small ways, but they soon escalated.

In Sharplink’s case, the stock has plummeted 86% from its peak, valuing the company at less than its digital asset holdings. Currently, it trades at about 0.9 times its Ethereum assets. At least Greenlane Holdings avoided a similar fate, even with a staggering 99% drop this year while retaining around $48 million in BERA tokens.

“Investors signed on with the understanding that they were not just holding onto a pile of gold and would likely see minimal returns,” noted Fedor Shabalin, an analyst at B. Riley Securities.

Data shows the median stock price of DAT companies in the U.S. and Canada has decreased by 43% this year, whereas Bitcoin has only dipped about 6% since January.

While some DATs still hold value above their underlying assets, the majority are facing losses for those who bought at their peaks. According to calculations, 70% will end the year at a lower value than where they began.

The poorest performers were those public companies that avoided Bitcoin in favor of smaller, more volatile tokens. Notably, two of Donald Trump’s sons supported Alt5 Sigma, which aimed to acquire over $1 billion in WLFI tokens but has seen its stocks decline around 86% since June.

This volatility can be attributed in part to companies borrowing funds for crypto acquisitions. Strategy implemented a series of convertible bonds and preferred stock to finance Bitcoin purchases, with the token at one point valued over $70 billion. As a whole, DAT has raised more than $45 billion this year for token acquisitions, according to B. Riley’s Shabalin.

However, difficulties are emerging as these companies struggle to meet interest and dividend payments on their debts, which is particularly challenging since the majority of their crypto holdings do not produce cash flow.

“Owning the strategy means taking on both Bitcoin risks and any corporate pressures involved,” stated Michael Lebowitz, a portfolio manager.

Strategy has recently sought to raise additional capital after facing disappointing stock sales in the U.S., even shifting its focus to Europe for a discounted perpetual preferred stock offering, although these shares are priced below their initial offering.

Smaller DATs, meanwhile, may find it more challenging to secure funding as crypto prices plummet and investor enthusiasm wanes.

The likely next step for these strategies could be selling off some crypto assets to cover expenses, a sentiment that the CEO of Saylor recently hinted at.

“If we need to pay dividends, we can sell Bitcoin,” Lee remarked on a podcast.

He mentioned he might consider this if their market value falls below their crypto asset value.

Such statements are surprising given Saylor’s previous assurances about retaining Bitcoin at all costs. He even joked in a February post that he would sell his kidney rather than let go of his Bitcoin.

Concerns are rising that DAT may be compelled to liquidate their cryptocurrencies, potentially driving prices down and creating a downward trend.

“If we hear that Strategy sold even a few Bitcoins, it could shake confidence in the whole Bitcoin trade, especially given Saylor’s previous comments,” Lebowitz expressed.

Strategy has established a reserve fund of $1.4 billion for short-term dividend payments, yet it is still projected to drop 38% this year, despite being over 1,200% higher since it began purchasing Bitcoin in August 2020.

For traders using borrowed funds, the collapse of DAT poses a risk of affecting the broader market, possibly leading to forced selling to manage margin calls. This problem could stifle new companies from adopting the same strategies and reduce capital market activity.

Even so, some new activity is emerging, such as slightly more valuable DATs acquiring lesser-known counterparts that are worth less than their assets.

For instance, Strive—co-founded by former Republican presidential candidate Vivek Ramaswamy—agreed to an all-stock acquisition of Semler Scientific, merging the two Bitcoin finance companies; Semler’s stock has dropped 65% this year.

Ross Carmel, a partner at Scenzia Los Ferens Carmel, anticipates a rise in DAT mergers and acquisitions in early 2026, underscoring the potential for further challenges.

Carmel suggested the industry might encounter new structured securities that provide investors with better downside protection for their trades.