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Conversations about the fall in the price of Bitcoin should include the impact of crypto-treasury companies, which contributed to the decline, argues Omid Malekan, a blockchain author and adjunct professor at Columbia Business School.
“Any analysis of why crypto prices keep going down need to include DATs [digital asset treasuries]”, Malekan he said in a place X on Tuesday. “In aggregate, they turned out to be a mass extraction and exit event – a reason for prices to go down.”
He added that there are a few companies that have tried to “create sustainable value. But I can count them on one hand.”
Analysts blamed trade tensions between the United States and China, among others macroeconomic factors for the decline of the crypto market, which saw Bitcoin (BTC) fluctuated between $99,607.01 and $113,560 over the past seven days, trading off their October 6 high of more than $126,000, according to that CoinGecko
Company in it for wrong reasons causing problems
Many crypto-buying companies have managed to raise millions from investors seeking exposure to crypto, and Malekan said some of the people launching crypto-treasury companies saw the model “as a get-rich-quick scheme.”
“Launching any kind of public entity is expensive,” he added. “The money needed for the shell / PIPE / SPAC corresponds to the millions. Like the fees paid to all the bankers and lawyers involved.”
“The money spent on those fees had to come from somewhere,” he said.
Crypto-treasury companies have acquired a substantial supply of tokens in leading cryptocurrencies, using leverage through share sales, convertible notes and debt offerings to do so, which has raised concerns that the companies are leveraged. could exacerbate a market downturn for the forced sale of assets.
Others sought to attract investors by generating returns on their holdings through measures such as stakingwhile some have reported plans to implement part of their holdings in crypto protocols for lending purposes and liquidity provision.
“The biggest damage that DATs did to aggregate crypto market capitalization was to provide a mass exit event for supposedly closed tokens,” Malekan said. “I’m still amazed that so many other investors haven’t cried for this.”
He added that “adding too much money and minting too many tokens even if they are closed or for the growth of the ecosystem is crypto gangrene.”
Related: Are struggling companies using crypto reserves as a PR lifeline?
The crypto treasure trend will explode in 2025
The number of crypto treasures has exploded this year, with an October report from asset manager Tracking Bitwise 48 new cases of companies adding Bitcoin to their balance sheets, total 207 overall, and collectively holding over a million tokens, they are worth over $101 billion.
At the same time, Ether (ETH), the second most adopted cryptocurrency for treasurers, was added to the balance sheets of 70 companies, according to to the Strategic ETH Reserve data. Collectively, they hold 6.14 million Ether, worth more than $20 billion.
Analysts told Cointelegraph that the DATs probably start to consolidate under a few bigger players as the cycle matures and companies try to attract investors, while others speculate that the trend will see companies expand to other areas of Web3.
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