The stock price of the pioneer has plummeted, and small companies are "continuously emerging," as the "digital currency treasury company" model reaches a "crossroads."

The digital asset treasury company (DATs) model inspired by Michael Saylor is facing severe challenges. These publicly listed companies, primarily engaged in purchasing cryptocurrencies, were once seen as a favorable way for investors to participate in the digital asset boom, but now they are struggling amid falling stock prices and dwindling market confidence.

On September 9, it was reported that even with the anticipated interest rate cuts by the Federal Reserve driving up assets like stocks and corporate bonds, the stock prices of digital asset treasury companies continued to decline. According to data from financial consulting firm Architect Partners tracking 15 DATs, the average stock price fell by 15% last week.

Individual stocks performed even worse. ALT5 Sigma Corp., which holds the WLFI tokens issued by Trump-related World Liberty Financial, dropped about 50% in just over a week; medical service provider Kindly MD Inc., which holds Bitcoin through its subsidiary Nakamoto Holdings, saw a decline of 80% from its May peak. Other DATs related to Ethereum and Solana also fell sharply, dragging down their token values.

It has been reported that in recent months, many DAT companies have begun to venture into more innovative areas, with complex financial instruments increasing operational risks and regulations becoming increasingly stringent. Nasdaq has reportedly begun requiring some companies holding tokens to seek shareholder approval before issuing new shares to finance token purchases. This change directly impacts the core model of DAT companies raising capital through stock sales rather than debt financing.

Market Oversaturation, Small Companies Flood In

Currently, more than 100 companies have incorporated cryptocurrencies into their balance sheets, most of which launched this year. Many small companies have rapidly transformed—from Japanese nail salons and cannabis sellers to marketing agencies—joining this trend. Ed Chin, co-founder of Parataxis Capital, stated:

"In the U.S., there are too many of these companies, and the level of differentiation is very low."

Nevertheless, the speculative frenzy has not completely subsided. Eightco Holdings Inc.'s stock surged over 3000% on Monday after announcing a Worldcoin purchase plan and appointing Wall Street analyst Dan Ives to its board.

However, this "crowded trade" is eroding investor confidence. Many companies have little business beyond holding tokens, and as stock prices decline, the confidence supporting the premiums begins to waver.

Notable DAT companies like Strategy and Japan's corresponding company Metaplanet Inc. have also seen significant stock price declines recently, showing that even market leaders are not immune to shifts in sentiment. In addition to the decline in stock prices, what is even more concerning is that CryptoQuant data shows that in August, treasury companies purchased only 14,800 bitcoins, a significant decrease from 66,000 in June.

Moreover, the average purchase size has also shrunk, dropping 86% from the peak of 2,025 to just 343 bitcoins last month. The cumulative growth rate of treasury companies' bitcoin holdings has slowed from 163% in March to only 8% in August.

Complex Financing Tools Increase Risks, Regulation Tightens

To obtain more funds for purchasing cryptocurrencies, DATs have begun to adopt more complex financing strategies. Crypto lending institutions, brokers, and derivatives trading desks have built a financing ecosystem specifically serving treasury companies, including tools such as bitcoin collateral loans, token-linked convertible bonds, and structured payments.

London web design company Smarter Web issued bonds linked to the value of bitcoin rather than pounds, meaning that when bitcoin rises, the company's debt also increases. CEO Andrew Webley argues that this tool carries lower risk, but such innovative financial instruments actually layer new risks on top of volatile assets.

Bitcoin collateral lending institutions like Two Prime are benefiting from the growing financing demand from DATs. CEO Alexander Blume stated, "Bitcoin treasury companies are our growth area, and over the past year, we have seen larger transaction sizes." The company currently has $1.25 billion in active outstanding loans.

At the same time, the regulatory environment is tightening. Reports indicate that Nasdaq has begun requiring some token-holding companies to obtain shareholder approval before issuing new shares for token purchase financing. This stock issuance model has been a core way for DATs to raise capital without incurring debt.

Travis Kling, Chief Investment Officer of Ikigai Asset Management, has expressed doubts about the entire model: "I have been trying to convince myself to buy some DATs, but I have not succeeded and probably never will." He believes this model "feels like the last gasp of a cycle, and I can't think of anything more absurd than this approach."