This December Could Determine the Future of Digital Asset Treasuries: CoinShares Issues Survival Warning

Following a turbulent few weeks in the cryptocurrency market, Digital Asset Treasury (DAT) companies find themselves back in the spotlight, but not for the reasons they had hoped.

Key Takeaways

Market Declines: Bitcoin and Ethereum have faced significant declines, triggering fear among investors.
Treasury Challenges: DAT firms are grappling with potential forced selling to maintain liquidity amid falling prices.
Potential Recovery: Experts believe a rate cut in December could bolster the crypto market and aid recovery.
Structural Issues: The recent market downturn has highlighted critical flaws in the DAT sector, necessitating a reevaluation of business models.
Evolution Required: The future of DAT companies will depend on their ability to adapt and focus on strong fundamentals.

The cryptocurrency market is facing significant challenges, with sharp declines in Bitcoin, Ethereum, and other digital assets raising concerns among investors. DAT companies, which have seen their stock values drop dramatically, are struggling with fears of forced selling to maintain liquidity. However, there is a possibility for recovery, especially if macroeconomic conditions improve or if a rate cut occurs in December. Experts emphasize the need for the sector to evolve and address its structural weaknesses to ensure long-term viability.

The State of Digital Asset Treasuries

Bitcoin, Ethereum, and the broader cryptocurrency market have experienced sharp drops, fueled by macroeconomic concerns, including the potential unwind of the yen carry trade if the Bank of Japan decides to raise interest rates. This environment of rising volatility, liquidations, and significant short positions held by institutions is creating a situation that could lead to investor panic.

Digital Asset Treasuries (DAT) have been particularly affected during this downturn. Companies that previously traded at multiples of their modified net asset value (mNAV)—sometimes at 3, 5, or even 10 times their mNAV—now find themselves trading at or below parity. The prevailing fear is that declining prices may prompt these treasuries to sell off their cryptocurrency holdings to meet loan obligations, protect equity valuations, or simply remain solvent.

James Butterfill, Head of Research at CoinShares, describes the current situation as precarious but not entirely hopeless. He explained: “Many DATs were trading at multiples like 3x, 5x, or even 10x their mNAV during the summer of 2025, but they are now all hovering around 1x or even lower. The path ahead is uncertain: declining prices could lead to chaotic sell-offs, or companies might retain their balances and profit from a possible price recovery. We favor the latter scenario, especially with the improving macroeconomic outlook and the potential for a rate cut in December, which could positively impact the broader crypto markets.”

If prices continue to drop, short sellers may intensify their efforts, especially against companies with large, illiquid, or highly correlated digital asset reserves.

Could December Bring a Turnaround?

The critical question facing DAT firms is whether they will enter a vicious cycle of forced selling or whether they could experience a powerful short squeeze. Butterfill is optimistic about the potential for the latter. He reiterated, “The market could either experience an aggressive sell-off from declining prices or benefit from a recovery if companies retain their balances. The latter seems more likely, as macroeconomic factors improve and discussions of a December rate cut could bolster crypto markets in general.”

Markets are approaching a significant inflection point as inflation rates decrease, bond markets stabilize, and speculation grows regarding a possible rate cut from central banks, including the Fed, in December. Such a move could weaken the dollar, alleviate liquidity pressures, and potentially catalyze a strong rebound across various digital assets. This recovery could be critical for DAT companies looking to navigate the current challenges.

The Need for Evolution in Digital Asset Treasuries

Even if a recovery scenario unfolds, Butterfill stresses that the industry must tackle some uncomfortable structural flaws. “The recent downturn in crypto markets has brought to light several weaknesses within the industry. Key factors contributing to this decline include a lack of robust operating businesses backing treasury strategies and a shift toward other blockchain-related equity investments,” he noted.

Investors are growing increasingly impatient with the current trends, which has adversely affected the entire sector's credibility.

The Future Model for Digital Asset Treasuries

Looking ahead, Butterfill predicts a cleansing phase that will filter out firms driven by fleeting momentum while rewarding those creating genuine economic value. He stated, “As the bubble bursts, the market is reassessing which companies truly align with the DAT model versus those that merely capitalized on trends. The future of DATs will hinge on a return to core principles: effective treasury management, credible business frameworks, and realistic expectations regarding the role of digital assets within corporate balance sheets.”

He believes that if markets stabilize or even trend upward, companies that maintained their holdings instead of liquidating may be well-positioned for a robust recovery. In such conditions, any asset managers employing broad short strategies against DAT stocks could quickly reverse their positions, heightening volatility to the upside. A rate cut in December could serve as the spark for such a shift.