A growing trend of Digital Asset Treasury (DAT) firms liquidating their cryptocurrency holdings to fund share buybacks is raising alarm about its sustainability and potential to trigger a dangerous cycle in the crypto market. As these companies see their stock prices plummet, they are selling the very assets that form their core value proposition in a desperate attempt to appease shareholders.
The Vicious Cycle of Selling to Save
The fundamental business model of a DAT firm is to hold cryptocurrencies like Bitcoin and Ethereum as primary treasury assets. Their stock price is intended to reflect the value of these holdings. However, a critical problem emerges when the market capitalization falls below the Net Asset Value (NAV)—meaning the stock trades for less than the underlying crypto on the balance sheet.
This “discount to NAV” creates intense pressure from shareholders for management to close the gap. The chosen method is often a share buyback. To fund these repurchases, companies need cash. If reserves are low, the only option is to liquidate part of their cryptocurrency treasury. This creates a troubling dynamic: the asset that gives the company its value is sold off to support its falling stock price.
This strategy has moved from theory to practice in November 2025. A prominent example is FG Nexus (FGNX), which sold 10,922 Ethereum (worth roughly $32.7 million) to finance a share repurchase program. This move came after its stock collapsed by 94% in just four months. They were not alone; ETHZilla executed a similar strategy the previous month, selling around $40 million in ETH for the same purpose. When a company’s solution to a sinking stock price is to sell its core assets, it begs the question of long-term viability.
Systemic Risks and a Challenging Future
This trend is not without significant consequences, both for the individual companies and the broader market.
The most immediate risk is a self-reinforcing selling spiral. As DAT firms sell crypto to buy back shares, the increased selling pressure can contribute to further declines in cryptocurrency prices. This, in turn, lowers the NAV of all DAT firms, potentially widening the discount on their stocks and forcing even more liquidations. Analysts estimate that if just 10% to 15% of DAT treasury positions are liquidated, it could translate to $4-6 billion in selling pressure, exacerbating market downturns.
Furthermore, many of these firms employ leveraged structures like convertible notes and perpetual preferred equity, which amplify the market pressure during a downturn. This situation is complicated by a tightening regulatory environment, with authorities like the SEC increasing scrutiny, which raises compliance costs and legal risks for the entire sector.
A Crossroads for the DAT Model
The current crisis forces a fundamental question about the DAT structure. If investors can gain exposure to cryptocurrencies simply by buying a spot ETF, what is the value proposition of an intermediary company that trades at a discount and resorts to selling its core assets ?
For the DAT model to prove sustainable, a profound strategic shift may be necessary. This could involve diversifying revenue streams through activities like staking, improving transparency to regain investor trust, and moving beyond a purely passive treasury holding model. The evolution of the discount to NAV in the coming quarters, alongside regulatory developments, will be a critical indicator of whether this innovative but stressed business model can mature and stabilize.
