“It was inevitable,” said Jake Ostrovskis, head of OTC trading at Wintermute, referring to the selloff in digital asset treasury stocks. “We’re getting to the point where there are too many.”
Several companies have begun selling their cryptocurrency reserves in an effort to fund share buybacks and prop up their share prices, effectively turning the cryptocurrency treasury model on its head.
North Carolina-based ether holder FG Nexus recently sold around $41.5 million of its tokens to fund its share buyback program. Its market capitalization is $104 million, while the cryptocurrencies it holds are worth $116 million. ETHZilla, a Florida-based life sciences company turned ether buyer, recently sold its tokens worth about $40 million, also to fund its share buyback program.
Sequans Communications, a French semiconductor company, sold about $100 million of its bitcoin this month to pay off its debt, in a sign of how some companies that took out loans to finance cryptocurrency purchases are now struggling. Sequans’ market capitalization is $87 million, while the bitcoin it owns is worth $198 million.
Georges Karam, chief executive of Sequans, said the sale was a “tactical decision aimed at unlocking value for shareholders given current market conditions.”
While sellers of bitcoin and ether can find buyers, companies with more niche tokens will find it harder to raise money from their holdings, according to Morgan McCarthy. “When a medical device company buys some long-tail asset in cryptocurrencies, a niche in a niche market, it’s not going to end well,” he said, adding that 95 percent of digital asset treasuries will “go to zero.”
Meanwhile, the strategy has doubled down and bought even more bitcoin as the price of the token has fallen to $87,000, from $115,000 a month ago. The company also faces the looming possibility of being delisted from some major stock indexes, which could put even more selling pressure on the stock.
But Saylor has downplayed any concerns. “Volatility is Satoshi’s gift to the faithful,” he said this week, referring to the pseudonymous creator of bitcoin.
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