Bitcoin Treasury Firms Face Darwinian Phase as Premiums Collapse

The core thesis from Galaxy Research is that the digital asset treasury trade has reached a definitive breaking point. For much of the recent bull market, DAT stocks traded at significant premiums to their underlying Bitcoin holdings. This premium reflected investor optimism about the firms’ ability to leverage their Bitcoin treasuries for growth through strategic acquisitions, lending, or other yield-generating activities. However, that dynamic has now violently reversed. According to the analysis, equity prices have fallen below the net asset value of the Bitcoin on these companies’ balance sheets, meaning DAT stocks have flipped from trading at a premium to trading at a discount.

This flip from premium to discount is more than a simple market correction; it represents the collapse of a fundamental valuation pillar. The premium was the fuel for an “issuance-driven growth loop.” Companies could issue new equity at elevated prices, use the capital to buy more Bitcoin, and theoretically increase their per-share NAV, attracting more investors and repeating the cycle. With the premium gone and stocks trading below NAV, this loop has broken. Issuing new equity becomes dilutive and unattractive, severing a primary channel for growth and capital accumulation that these firms relied upon.

Closely tied to the premium collapse is the dangerous reversal of another key mechanic: leverage. In a rising market, leverage amplifies gains. Many Bitcoin treasury companies employed leverage—either through direct borrowing or structured financial products—to enhance returns on their Bitcoin holdings. When equity premiums were high and Bitcoin’s price was climbing, this strategy supercharged growth. However, Galaxy warns that leverage has now “turned into a liability” and a source of significant downside risk.

The catalyst for this shift was Bitcoin’s precipitous drop from its October peak near $126,000 to lows around $80,000. This decline triggered a sharp contraction in overall risk appetite and drained liquidity from the crypto market. For leveraged firms, falling asset prices mean margin calls and forced liquidations, creating a vicious cycle of selling pressure. The report highlights the October 10 deleveraging event as a critical accelerant, which wiped out open interest across futures markets and severely weakened spot market depth. This environment turns what was once a growth driver into an existential threat, punishing over-leveraged players and forcing a sector-wide deleveraging.

Galaxy Research’s characterization of a “Darwinian phase” is apt. The confluence of vanished equity premiums and toxic leverage creates a harsh environment where only the strongest, most conservatively managed Bitcoin treasury firms are likely to survive. Companies with robust balance sheets, minimal leverage, and sustainable operational models will have a distinct advantage. In contrast, those that aggressively pursued the issuance-and-leverage model during the boom are now exposed to intense financial stress.

This shakeout represents a fundamental maturation—or contraction—of the crypto equities sector. Investors are no longer paying for potential future leverage returns or strategic optionality at a premium. Instead, they are scrutinizing basic financial health and discounting assets relative to a straightforward Bitcoin NAV. The report suggests the DAT trade has found its “natural limit,” implying the easy money has been made and the sector must now navigate a more challenging, selective phase. The outcome will likely be a consolidated landscape with fewer players, as the market enforces a brutal efficiency, separating viable business models from those built on unsustainable financial engineering.