How long can cryptocurrency hoarding companies survive?

Author: Clow

There's an old saying on Wall Street: 'Only when the tide goes out do you discover who's been swimming naked.'

In November 2025, the tide receded faster than anyone imagined.

The crypto market evaporated $1.4 trillion in six weeks, Bitcoin nearly fell below $80,000, and Ethereum plummeted by over 40%. But those truly drowning weren't retail investors, but rather the publicly listed companies that had been hailed by Wall Street as "pioneers of the institutional bull market."

MicroStrategy faces being removed from the MSCI index, with a $11.6 billion forced sell-off hanging over its head; Bitmine is facing a $3.6 billion paper loss, trapped in a death spiral of "toxic financing," with management resorting to "buy one, get two free" tactics to survive. What was once "alchemy" has now become a "meat grinder." When the "flywheel" stops turning, who will be the last survivor?

01The Shattering of the Illusion

In the first half of 2025, the market was immersed in a beautiful illusion: the Federal Reserve would begin an aggressive interest rate cut cycle, and cheap money would soon flood the market.

Institutional investors frantically leveraged their investments, betting on a liquidity feast. Bitcoin broke through $100,000, Ethereum surged towards $5,000, and the stock price of DAT (Digital Asset Treasury) skyrocketed—you could buy a stock containing $1 of Bitcoin for $2 and still feel like you got a bargain.

However, reality was incredibly cruel.

Inflation data proved stickier than expected, and the benefits of the "Trump trade" quickly faded. On October 10th, Trump suddenly announced a 100% tariff on Chinese goods, becoming the final straw that broke the camel's back. Within hours, over $19 billion in leveraged positions were forcibly liquidated. The crypto market experienced one of the largest liquidation days in history. The sharp reversal in macroeconomic expectations directly led to a precipitous drop in institutional liquidity. In early November, trading platforms witnessed a net outflow of over $3.6 billion. Institutional investors shifted from "embracing risk" to "avoiding risk." DAT companies—these leveraged crypto exposures with operating costs—were the first to be sold off. When the underlying asset falls by 5%, DAT stocks often fall by 15%-20%. This non-linear decline triggered a negative feedback loop, causing the entire sector's valuation system to collapse in a short period. Against the backdrop of escalating geopolitical turmoil and fiscal uncertainty, Bitcoin's "digital gold" narrative was partially preserved, while Ethereum was abandoned due to a lack of a clear story. Those DAT companies that bet on the "Ethereum high beta" strategy are experiencing catastrophic consequences. To understand why DAT companies are so vulnerable, we must first dissect their profit-making logic—the reflexive flywheel. This model, pioneered by MicroStrategy founder Michael Saylor, is perfect for bull markets: Step 1: The company's stock is traded at a premium (buying shares containing $1 of Bitcoin for $2); Step 2: Utilizing the premium, new shares are issued at a higher price on the secondary market to raise funds; Step 3: Step 4: Use the raised funds to buy more Bitcoin; Step 5: Since the stock is sold at a premium, each round of financing increases the "Bitcoin content per share" for existing shareholders; Step 6: The stock price rises further, maintaining the premium, and the cycle repeats. This is a money-printing machine. As long as the price of Bitcoin rises, the stock price rises even faster. A report by Pantera Capital shows that during the "DAT Summer" of 2024-2025, this model made countless followers incredibly wealthy. Bitmine's mNAV multiple (market capitalization relative to net assets) once reached as high as 5.6 times. This means that investors were willing to spend $5.60 to buy $1 worth of Ethereum exposure. Crazy? In a bull market, this is called a "faith premium." But the flywheel has a fatal flaw: it only works in one-way markets. When the market reverses, the premium disappears, and mNAV falls below 1.0, the entire logic instantly reverses. At this point, issuing new shares is no longer "value creation," but rather "dilution"—for every share sold, the equity of existing shareholders is diluted. The company loses its financing ability and becomes a "zombie DAT." Since it has to collect management fees and faces operational risks, investors might as well just buy an ETF. Even more frightening is that reflexivity can backfire: Stock price decline → Market doubts about solvency → Widening discount → Loss of financing ability → Liquidity depletion → Forced asset sell-off. In November 2025, this death spiral was playing out across the DAT sector. The flywheel had become a meat grinder.

03The Sword of Damocles Worth $11.6 Billion

Of all the risks, the most systemically destructive is: MicroStrategy may be removed from the MSCI index.

MSCI, a leading global index provider, has initiated consultations to consider removing companies with more than 50% of their balance sheets from its indices.

The reason is simple:These companies are more like investment funds than traditional operating companies, and do not meet the definition of a broad market equity benchmark.

The final decision will be announced on January 15, 2026. However, the market has already priced in this tail risk. The consequences will be catastrophic. According to JPMorgan Chase's calculations, if MSCI removes MicroStrategy, funds tracking that index alone will experience approximately $2.8 billion in direct outflows. But if other index providers such as S&P and FTSE follow suit to maintain methodological consistency, the total forced sell-off could reach as high as $11.6 billion. This is not a rational judgment by active investors, but a mechanical selling by passive funds. They have to sell, no matter how low the price. In a market where liquidity has dried up, $11.6 billion in selling pressure is enough to trigger a "double whammy" of declining NAV: Bitcoin price drops lead to a decrease in NAV; index removal causes a sharp drop in valuation multiples. If MSTR's stock price falls below $150 and loses its index premium, its flywheel will completely reverse—unable to finance purchases, the price may continue to fall, forming a perfect death spiral. This will turn MicroStrategy from the "biggest buyer" in the Bitcoin market into a powerless bystander, or even a potential seller in extreme circumstances. The market has finally realized that DAT is not a "diamond hand" driven by faith, but rather a "forced hand" constrained by financial statements. The Cost of the Ethereum Gamble: $3.6 Billion in Unrealized Losses. If MicroStrategy faced regulatory risks, then Bitmine gambled its own life. Bitmine's strategy was extremely aggressive: it attempted to become "the Ethereum version of MicroStrategy." Its investment logic was that Ethereum is more volatile than Bitcoin and generates staking rewards, therefore it should provide excess returns in a bull market. Based on this logic, Bitmine engaged in massive lending, accumulating over 3.6 million ETH. However, reality proved harsh. Ethereum lacked Bitcoin's "digital gold" consensus; during market downturns, its high volatility became a double-edged sword. Bitmine built most of its positions at an average price of $4,000, while Ethereum struggled below $3,000. Its paper losses have exceeded $3.6 billion. Even more devastatingly, Bitmine has "poured in almost all of its cash," leaving no funds for averaging down. It has become a massive, trapped bull, only able to pray for a market reversal. Evidence of its desperation comes from its September 2025 funding round. Bitmine sold 5.22 million shares at $70 per share, along with two warrants for each share, with an exercise price of $87.50, totaling 10.4 million warrants. This "buy one, get two free" structure is known in the financial world as "toxic financing," a sign of a company's desperation. The 10.4 million warrants created a huge "selling pressure wall" at the $87.50 level; any rebound to this level would be met with selling pressure. **Devastating Dilution:** If all warrants are exercised, over 15 million new shares will be issued, resulting in an immediate dilution of 7.26% for existing shareholders. **Collapse of Confidence:** The market interprets this as management sacrificing long-term value for survival. Following the announcement of this transaction, Bitmine's mNAV premium plummeted from 5.6x to 1.2x, falling as low as 0.86. The flywheel has become a dilution machine. All investors' eyes are fixed on one date: January 15, 2026. MSCI will announce its final decision. This is not just an index adjustment announcement, but also a judgment day for the DAT sector.

• Pessimistic Scenario

If MSCI decides to remove it, a large-scale passive fund sell-off will occur in February 2026.

Stocks like MicroStrategy may face an instantaneous repricing of 30%-50%, and the entire DAT sector will enter a period of stagnation.

Even more frightening is the contagion effect.

Once MicroStrategy is removed, other index providers are likely to follow suit, triggering a domino effect.

Those DAT companies that heavily rely on index funds will face the risk of liquidity depletion. Optimistic Scenario: If MSCI retains these companies or only restricts their weighting, the market will experience a massive short squeeze. Short positions previously established to hedge risks will have to be closed, potentially triggering a short-term violent rebound. However, even if they escape this predicament, the DAT sector will find it difficult to return to its past glory. The existence of spot ETFs has permanently compressed the valuation premium of DAT. The only variable comes from the policy level. The US Senate plans to mark the Crypto Markets Structure Act in December 2025 and strive to submit it to the President for signature in early 2026. The core objective of this bill is to clarify the jurisdictional boundaries between the CFTC and SEC, defining through legislation which digital assets qualify as "digital goods." If passed, the bill will grant Bitcoin and Ethereum a clear legal status. This will be DAT's most powerful weapon against MSCI's decision to remove it. If the law recognizes these assets as legitimate corporate reserve assets, index providers will find it difficult to remove them on the grounds of "unclear nature." This is DAT's only chance to turn things around. However, until the outcome is clear, everything remains uncertain. The market is holding its breath, waiting for the outcome of this high-stakes gamble to be revealed in two months. Summary of 06: The DAT model has not disappeared, but it is undergoing a dramatic evolution. The "coin hoarders" of 2024 are being eliminated, replaced by "capital operators" in 2026 who understand capital allocation, risk management, and regulatory maneuvering. The so-called "flywheel" is never a perpetual motion machine, but rather a sail unfurled when the wind is favorable. In a storm, if you don't furl your sails in time, the whole ship will capsize. The market has already taught everyone a lesson at the cost of $1.4 trillion: In the crypto world, survival is everything. Only those players who remain standing on the ruins are qualified to welcome the next cycle. Only investors who understand this shift will survive.