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The crypto bros at risk of losing everythingInvestors are getting swept up by a ‘castle in the air’ that threatens to come crashing down
Chris PriceMarkets Editor
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01 October 2025 1:00pm BST
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The first sign of trouble came last Monday morning as traders logged on to their laptops to check their latest crypto bets.
Overnight, prices of Bitcoin and Ether had fallen sharply, wiping off an estimated $1.5bn (£1.1bn) from crypto markets in a fresh bout of turmoil.
Investors were stumped about the sharp reversal. Without an obvious catalyst, rumour and conjecture began to swirl in the market, triggering a mini-panic that eventually pushed down the price of Bitcoin from more than $115,000 to below $109,000 in a matter of days.
As the dust settled, traders finally found the culprit. Not a piece of bad economic news, but a new type of crypto-investing vehicle that has become the big ticket for investors: digital asset treasury (DAT) companies.
In recent months, these bizarre new businesses have grown at a rapid pace.
DATs are simple yet defy convention. They are vehicles listed on the stock market which use money pumped in by shareholders to buy Bitcoin or another specific cryptocurrency.
All they do is hold these digital currencies in their treasury departments – hence the name – and as investors pour more money in, they buy more of crypto.
Yet because of the exuberance around Bitcoin and its rivals, they have seen their share prices balloon well above the actual underlying value of the cryptocurrency.
This has allowed them to raise more money to buy more crypto, thus pushing up the price in a virtuous cycle.
‘Castles in the air’So far this year, DATs – or Bitcoin treasury companies (BTCs) if they own Bitcoin – have drawn a record $15.4bn in fresh capital, giving them more firepower to buy Bitcoin and other currencies and further raise prices.
It is perhaps the best example of John Maynard Keynes’s “castles in the air” theory – which says the value of something is based on what someone will pay and not its intrinsic value – and all seemed to be going so well until the mood darkened last week.
As questions grew over whether these funds could maintain their growth, many DATS started to dial down their crypto purchases, taking the steam out of the market.
The correction has fuelled fears about a sharper DAT crash and the impact on retail investors.
Ed Hindi, investment chief at fund manager Tyr Capital, said the wobble had been driven by fears that the share price premium had been more and more out of kilter.
“It was a bit too high. The whole thing has started to unwind. You could just feel that there was something brewing. Because of the sheer amount of DATs trying to raise money, the market just cooled down,” he said.
Michael Saylor’s Strategy was the first company to convert its cash reserves into Bitcoin Credit: Joe Raedle/Getty
The slowdown in the market has been sharp. Some 64,000 Bitcoins were bought by DATs in July, but that dropped 80pc to just 12,600 in August, and 15,500 so far in September, according to CryptoQuant.
The people hit hardest by the downturn are not the billionaires who back these DATs, but ordinary investors who have bought shares in them.
Eren Osman, from private bank Arbuthnot Latham, said retail investors were getting “swept up” by the DAT boom with huge potential consequences.
“The risk with any asset bubble – be it crypto, commodities, tech stocks, energy – is that the larger that bubble is in terms of total asset size, the bigger impact it will have on the wider financial markets and the economy,” he said.
“Crypto today is a much bigger piece of the total pie than it was 15 years ago.”
DATs were pioneered by Michael Saylor in 2020, the American billionaire entrepreneur whose business, MicroStrategy, now known simply as Strategy, became the first to convert a substantial portion of its cash reserves into Bitcoin.
It has proven to be a hugely successful venture for Saylor and investors in Strategy. Saylor converted the data mining software company’s cash reserves into Bitcoin when the world’s largest cryptocurrency was valued at less than $12,000.
Since then, the price run-up has turned its holdings into a fortune worth $71bn, while the buzz around the company means it is now worth $92bn on the stock market – nearly 30pc higher than the value of its actual Bitcoin holdings.
Michael Novogratz’s Galaxy Digital acts as a DAT and also finances other DATs Credit: Jutharat Pinyodoonyachet/Bloomberg
Unsurprisingly, that has triggered a wave of copycats – around 85 and counting this year — such as Mara Holdings, which owns $5.8bn worth of Bitcoin but has a market capitalisation of $7bn.
Britain’s biggest Bitcoin-buying business, The Smarter Web Company, has amassed a portfolio worth $282m, but has seen its stock market value climb to $300m.
The concept of DATs has been backed by high-profile figures in the digital asset space, giving it added allure.
These include Michael Novogratz, chief executive of Galaxy Digital, a giant in digital-asset financial services. A Goldman Sachs alumnus and a former partner at Fortress Investment Group, his company acts as a DAT, while also financing other DATs.
The first cryptocurrency fund was launched more than a decade ago by Dan Morehead’s Pantera Capital Credit: David Paul Morris/Bloomberg
Other notable figures include Joseph Lubin, a former Princeton roommate of Mr Novogratz who chairs SharpLink Gaming, as well as Dan Morehead, the chief executive of Pantera Capital, which launched the first cryptocurrency fund more than a decade ago when Bitcoin was worth $65.
Wild rideWhile the DAT boom has captured the imagination, it has not been for the faint-hearted.
The Smarter Web Company’s share price has plunged 80pc since its June peak amid concerns the market is becoming saturated as bosses seek to capitalise on this latest crypto craze.
Lubin’s SharpLink, which holds Ether, saw its shares plunge 72pc in a single day in June. Its share price had surged by 409pc in the months after its launch in 2020, but it has since dropped by 98pc.
These sharp swings have attracted the scrutiny of regulators.
America’s main financial regulators, the Securities and Exchange Commission and Financial Industry Regulatory Authority, have started examining unusual trading patterns in more than 200 companies using crypto treasury strategies.
Chris Beauchamp, chief market analyst at IG, said: “These companies are, in my view, a bit like crypto with the volatility turned up to 11 – they see outsized moves that have little regard for their actual valuation, or indeed the valuation of Bitcoin.”
Amid signs of the sector cooling, there has been a shift towards consolidation.
Strive, which had been backed by billionaire investors such as Peter Thiel and Bill Ackman before it switched to a Bitcoin treasury strategy in May, agreed last week to buy Bitcoin hoarder Semler Scientific.
Peter Thiel-backed Strive agreed last week to buy Bitcoin hoarder Semler Scientific Credit: Eva Marie Uzcategui/Bloomberg
Savvy investors might say they have seen this kind of volatility before.
Real estate investment trusts, known as REITs, operate in a similar way to DATs. They own and finance investments in the property sector, trade at a premium to their underlying assets and issue new shares to raise capital to invest again.
“DATs might seem new, but really they’re a new version of REITs, namely they can use rising prices to buy more crypto on the way up, but are likely to suffer more on the way down,” said Beauchamp.
That leaves retail investors at risk of getting burned.
Osman, from Arbuthnot Latham, said: “There’s plenty of companies out there that have leveraged bets on equity – private equity is a great example.
“The difference that you’re seeing here is that these [DAT] companies are just buying assets through speculation with the expectation that they will go up as a sure bet.” |
