Crypto treasury companies pivot to fringe tokens, stoking volatility fears

By Hannah Lang

(Reuters) -As companies focused connected stockpiling bitcoin and different large cryptocurrencies travel nether unit amid marketplace saturation and souring sentiment, caller entrants are pushing into little fashionable tokens, stoking worries implicit accrued volatility.

Buoyed by U.S. President Donald Trump's crypto-friendly stance and inspired by the meteoric occurrence of Michael Saylor's Strategy, the fig of publicly-traded companies investing successful cryptocurrencies ​in the hopes they volition admit has boomed.

As of September, determination were astatine slightest 200 integer plus treasury, oregon DAT, companies - mostly focused connected bitcoin - with a combined capitalization of astir $150 ‌billion, up implicit threefold from a twelvemonth earlier, according to an investigation by instrumentality steadfast DLA Piper.

More companies, galore of them penny stocks seeking ways to boost profits, are launching daily. But arsenic bitcoin sags, they are turning to esoteric, much volatile tokens successful a bid ‌to amplify returns, according to a Reuters investigation of much than 3 twelve institution announcements.

RISKS AHEAD FOR INVESTORS?

In caller weeks, for example, Greenlane, OceanPal and Tharimmune announced plans to stockpile BERA, NEAR and Canton Coin, respectively.

The inclination illustrates however the often-volatile and speculative satellite of cryptocurrencies is becoming much entwined with accepted markets, creating imaginable hazards for investors.

"DATs are expanding towards much exotic and little liquid cryptocurrencies, and that's precisely wherever the hazard could beryllium overmuch higher," said Cristiano Ventricelli, vice president and elder expert of integer assets astatine Moody’s Ratings.

"When markets drop, determination is much unit connected the equity of these companies," Ventricelli added.

A VOLATILITY PIPELINE

Since April, galore DATs person funded token purchases via backstage placements oregon PIPEs -⁠ selling shares straight to backstage investors - usually astatine a discount.

At slightest ‌40 DATs raised much than $15 cardinal combined via PIPEs betwixt April and November, lone 5 of which were focused connected bitcoin, Reuters' investigation found. Bitcoin registered a monthly nonaccomplishment successful October for the archetypal clip since 2018.

Heavyweight crypto investors successful these deals see Winklevoss Capital, Galaxy Digital, Jump Crypto, Pantera Capital, Kraken and DWF Labs, nationalist information shows.

While immoderate ‍institutional investors tin bargain tokens directly, DATs connection the accidental to leverage returns and fto much cautious investors summation crypto vulnerability done regulated nationalist firms.

PIPEs let companies to rapidly entree cash, but shareholder dilution and the imaginable resale of shares erstwhile lockup periods extremity often stoke banal terms volatility. And due to the fact that galore DAT companies are truthful reliant connected PIPEs, they are particularly susceptible erstwhile markets fall, accidental analysts.