Crypto hoarders dump tokens as shares tumble

Crypto-hoarding companies are ditching their holdings in a bid to prop up their sinking share prices, as the craze for “digital asset treasury” businesses unravels in the face of a $1 trillion cryptocurrency rout.

Shares in Michael Saylor-led Strategy, the world’s biggest corporate bitcoin holder, have tumbled 50 percent over the past three months, dragging down scores of copycat companies.

About $77 billion has been wiped from the stock market value of these companies, which raise debt and equity to fund purchases of crypto, since their peak of $176 billion in July, according to industry data publication The Block.

With Saylor’s company now worth less than the bitcoin it holds, investors worry that a business model that relied on a virtuous circle of rising crypto prices and massive share and debt issuance is now unraveling.

“There’s going to be a fire sale at these companies; it’s going to get worse,” said Adam Morgan McCarthy, senior research analyst at crypto data firm Kaiko. “It’s a vicious cycle. As soon as the prices start tanking, it’s a race to the bottom.”

Saylor’s software business inspired a raft of copycats in industries including film production, vaping, and electric vehicles, after its pivot to a “bitcoin treasury” strategy drove a huge increase in its share price. Purchases by such companies have been a big driver of bitcoin hitting a record high last month.

But the craze has soured as cryptocurrencies bore the brunt of a sell-off in speculative assets this autumn, in a sharp reversal for a sector that had been buoyed by President Donald Trump’s pledge last year to turn the US into a “bitcoin superpower.”

Shares in Japan’s biggest bitcoin holder Metaplanet have plunged 80 percent since their June peak. The company on Tuesday raised a $130 million loan backed by its bitcoin, which it said would be used for purposes including buying back stock. The Smarter Web Company, the UK’s biggest bitcoin buyer, has experienced a 44 percent stock price drop this year. It is valued at £132 million while the bitcoin it holds is worth about $232 million.