On September 24, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) jointly announced that they would investigate over 200 publicly listed companies that had previously announced crypto treasury plans, citing "abnormal stock price fluctuations" that commonly occurred just before these companies released related news.

Since MicroStrategy first incorporated Bitcoin into its balance sheet, "Crypto Treasury" has become a sensational "financial alchemy" in the U.S. stock market—new stocks like Bitmine and SharpLink have seen their prices soar by dozens of times due to similar operations. According to data released by Architect Partners, 212 new companies have announced plans to raise approximately $102 billion since 2025 to purchase mainstream crypto assets like BTC and ETH.

However, this capital frenzy has raised widespread skepticism while pushing prices higher. MSTR's mNAV (market capitalization to net asset value ratio) fell from 1.6 to 1.2 within a month, while two-thirds of the top twenty crypto treasury companies had an mNAV below 1. Questions regarding asset bubbles, insider trading, and other issues have emerged, and this new asset allocation trend is facing unprecedented regulatory challenges.

How the Flywheel of Crypto Treasury Companies Operates

The financing flywheel of treasury companies is built on the mNAV mechanism, which essentially represents a reflexive flywheel logic that allows treasury companies to have what seems like "infinite bullets" during a bull market. mNAV refers to the market net asset value ratio, calculated as the company's market capitalization (P) relative to its net asset value (NAV) per share. In the context of treasury strategy companies, NAV refers to the value of the digital assets they hold.

When the stock price P is higher than the net asset value NAV (i.e., mNAV > 1), the company can continue to raise funds and reinvest the raised capital into digital assets. Each issuance and purchase will push up the per-share holdings and book value, further strengthening market confidence in the company's narrative and driving the stock price higher. Thus, a closed-loop positive feedback flywheel begins to turn: mNAV rises → financing through issuance → purchase of digital assets → per-share holdings increase → market confidence strengthens → stock price rises again. It is through this mechanism that MicroStrategy has been able to continuously finance the purchase of Bitcoin over the past few years without severely diluting its shares.

Once the stock price and liquidity are pushed high enough, the company can unlock a complete set of institutional funding mechanisms: it can issue debt, convertible bonds, preferred stock, and other financing tools, turning market narratives into book assets, which in turn push up the stock price, forming a flywheel. The essence of this game is the complex resonance between stock price, narrative, and capital structure.

However, mNAV is a double-edged sword. A premium can represent a high level of market trust, but it may also simply be speculative hype. Once mNAV converges to 1 or falls below 1, the market shifts from "thickening logic" to "dilution logic." If the price of the tokens themselves falls during this time, the flywheel will switch from positive rotation to a negative feedback loop, resulting in a double whammy of market capitalization and confidence. Additionally, the financing of treasury strategy companies is also built on the mNAV premium flywheel; when mNAV remains at a discount for an extended period, the space for issuance will be blocked, and the business of small and mid-cap shell companies that are already stagnant or on the verge of delisting will be completely overturned, causing the established flywheel effect to collapse instantly. Theoretically, when mNAV is 1, a more reasonable choice for the company would be to sell holdings to repurchase stock to restore balance, but it should not be generalized; discounted companies may also represent undervalued assets.

During the bear market of 2022, even when MicroStrategy's mNAV briefly fell below 1, the company chose not to sell coins to repurchase but instead insisted on retaining all Bitcoin through debt restructuring. This "holding on" logic stems from Saylor's faith-based vision for BTC, viewing it as a core collateral asset that "will never be sold." However, this path is not replicable by all treasury companies. Most altcoin treasury stocks lack stable core businesses, and transforming into "coin-buying companies" is merely a means of survival without the backing of faith. Once the market environment deteriorates, they are more likely to sell off to stop losses or realize profits, triggering a stampede.

Related Reading: "First Selling Coins, Delisting, Coin Stocks Are No Longer Cryptocurrency Behemoths"

Is Insider Trading Present?

SharpLink Gaming is one of the earliest cases to cause market turbulence in this wave of "crypto treasury frenzy." On May 27, the company announced it would increase its holdings of Ethereum as reserve assets by up to $425 million. On the day the news was released, the stock price soared to $52. However, strangely, the trading volume of the stock had already significantly increased on May 22, with the price jumping from $2.7 to $7, even though the company had not yet released any announcements or disclosed any information to the SEC.

This phenomenon of "price movement before news release" is not an isolated case. MEI Pharma announced on July 18 that it would initiate a $100 million Litecoin treasury strategy, but its stock price had already risen for four consecutive days before the announcement, climbing from $2.7 to $4.4, nearly doubling. The company did not submit any significant updates or public press releases, and its spokesperson declined to comment.

Similar situations have also occurred with companies like Mill City Ventures, Kindly MD, Empery Digital, Fundamental Global, and 180 Life Sciences Corp, all of which experienced varying degrees of abnormal trading fluctuations before announcing their crypto treasury plans. The possibility of information leaks and pre-trading has raised regulatory concerns.

Will the DAT Narrative Collapse?

Arthur Hayes, an advisor to "Solana MicroStrategy" Upexi, pointed out that crypto treasury has become a new narrative in the traditional corporate finance circle. He believes this trend will continue to evolve across multiple mainstream asset tracks. However, we must clearly see that on each chain, there can ultimately only be one or two winners.

At the same time, the head effect is accelerating. Although over 200 companies have announced crypto treasury strategies covering BTC, ETH, SOL, BNB, TRX, and other chains by 2025, funds and valuations are rapidly concentrating in a very small number of companies and assets—BTC treasuries and ETH treasuries occupy a significant portion of DAT companies. In each asset category, only one or two companies can truly emerge, with MicroStrategy leading in the BTC track, Bitmine in the ETH track, and possibly Upexi in the SOL track, while other projects struggle to form competitive scale.

As Michael Saylor has verified, there is a large amount of institutional fund managers in the market who want exposure to Bitcoin risk but cannot directly buy BTC or hold ETFs—they can buy MSTR stock instead. If you can package a company that holds crypto assets into their "compliance basket," these funds are willing to buy assets worth only $1 on the books for $2, $3, or even $10. This is not irrational; it is institutional arbitrage.

In the latter half of the cycle, new issuers will still emerge in the market, resorting to more aggressive corporate financial tools to pursue higher stock price elasticity. When prices decline, these practices will backfire. Arthur Hayes predicts that this cycle will see a large DAT incident similar to the FTX collapse. At that time, these companies may face significant losses, and their stocks or bonds could experience substantial discounts, causing major market turmoil.

Regulators have also noticed this structural risk. In early September, Nasdaq proposed to enhance the review of DAT companies; today, the SEC and FINRA have jointly initiated investigations into insider trading. These regulatory actions aim to compress insider spaces, raise issuance thresholds, and increase financing difficulties, thereby reducing the manipulation space for newly emerging DAT companies. For the market, this means that "pseudo-leaders" will be accelerated out, while true leading companies will continue to survive and even grow through narrative.

Conclusion

The narrative of crypto treasury remains, but the thresholds are rising, regulations are tightening, and bubbles are being cleared simultaneously. For investors, it is essential to understand the logic and arbitrage paths behind the financial structure while remaining vigilant about the risk accumulation behind the narrative—this "on-chain alchemy" cannot be performed indefinitely; the winners will prevail, and the losers will exit.

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