Crypto Treasury Companies Worsen Market Decline, Warns Columbia Professor
The ongoing slump in cryptocurrency prices isn’t just a result of macroeconomic pressures or geopolitical instability—it’s being made worse by the very companies that were supposed to support the market. That’s the view of Omid Malekan, a blockchain author and adjunct professor at Columbia Business School, who warns that digital asset treasury (DAT) firms are playing a significant, and largely overlooked, role in accelerating the downturn.
According to Malekan, while many blame the current volatility in the crypto sector on rising tensions between global powers or inflationary concerns, a more nuanced analysis reveals that the internal dynamics of the crypto space—particularly the behavior of treasury-focused firms—are also contributing to the decline.
“Any serious look at why crypto prices keep dropping must consider the actions of digital asset treasuries,” Malekan emphasized. “In practice, they have functioned as a mass extraction and exit mechanism, not a force for sustainable growth.”
He pointed out that while a few companies genuinely aimed to build long-term value, they are the exception, not the rule. “You can count the real value creators on one hand,” he added.
Crypto Treasuries: From Vision to Speculation
Crypto treasury companies, which have surged in number over the past year, were initially seen as a way to legitimize digital assets by integrating them into corporate balance sheets. However, the trend has since morphed into what many critics now see as a speculative bubble. Companies have been raising large sums from investors, often under the promise of gaining exposure to high-performing cryptocurrencies like Bitcoin and Ether.
But instead of holding assets long-term or contributing to protocol development, many of these firms have engaged in high-risk strategies. Some used leverage by issuing shares, convertible debt, or other financial instruments to acquire tokens—actions that can backfire spectacularly during market corrections. When crypto prices fall, leveraged firms may be forced to sell assets to cover obligations, intensifying downward pressure on the market.
“There’s a serious cost to launching public entities in this space,” Malekan explained. “The fees for legal, banking, and compliance services alone run into the millions. That money has to be recouped somehow, and often it comes at the expense of the tokens themselves.”
The Illusion of Locked Tokens
One of the most damaging practices, according to Malekan, is the mass release of tokens that were supposedly locked for long-term use or ecosystem development. Instead of fostering growth, these releases effectively acted as exit events for insiders, undermining investor confidence and flooding the market with supply.
“The most destructive impact came from DATs enabling mass liquidation of tokens that were supposed to be locked,” he said. “It’s astonishing more investors didn’t object to this.”
He likened overfunding and excessive token minting to a disease: “Raising too much capital and minting too many tokens—even if they’re technically locked—corrupts the ecosystem. It’s the gangrene of crypto.”
The Surge in Corporate Crypto Holdings
Despite these concerns, crypto treasuries are growing rapidly. A recent report highlighted that 48 new companies added Bitcoin to their balance sheets in October alone, bringing the total number of corporate holders to 207. Together, these firms now control more than one million BTC, valued at over $101 billion.
Ether has also found favor among corporate treasuries, with 70 companies now holding approximately 6.14 million ETH—worth over $20 billion. As corporate crypto exposure grows, so does the risk that poor management decisions could have system-wide repercussions.
Consolidation and the Future of DATs
Looking ahead, analysts expect consolidation in the DAT space. As the market matures, smaller or poorly managed treasury firms may be absorbed by more established players. This shift could bring much-needed stability, but it also raises questions about centralization and influence.
Some experts believe this trend will push treasury firms to diversify their strategies. Instead of merely holding assets, they may begin actively participating in the Web3 ecosystem—through lending, liquidity provision, staking, or supporting decentralized protocols.
Where DATs Went Wrong
At its core, the problem with many DAT firms lies in their short-term mindset. Rather than aligning with the long-term vision of decentralization and financial innovation, they saw the crypto market as a quick path to wealth. By tapping into investor enthusiasm and raising massive funds, they created an unsustainable feedback loop of overvaluation and eventual sell-offs.
The aggressive use of financial engineering—such as special-purpose acquisition companies (SPACs), private investment in public equity (PIPEs), and other capital-raising methods—further complicated the issue. These mechanisms may have enabled rapid growth, but they also introduced layers of risk and misaligned incentives.
The Role of Investor Due Diligence
One underlying issue is that investors often failed to scrutinize these treasury firms adequately. In the rush to gain crypto exposure, many overlooked red flags such as opaque governance, unrealistic growth projections, or questionable tokenomics.
Experienced investors and institutions must take a more cautious approach moving forward. Greater emphasis should be placed on transparency, actual use cases, and long-term sustainability rather than hype and speculative returns.
Regulatory Implications
The rise and potential fall of DATs could attract regulatory attention. Authorities may begin to scrutinize the financial practices of these firms, particularly if their actions result in significant market manipulation or harm to retail investors. Calls for stricter oversight of token releases, leverage usage, and disclosure requirements are likely to grow louder.
Moving Toward Sustainable Models
There’s still a path forward for crypto treasury firms—but it requires a fundamental shift in strategy. Instead of viewing treasuries as financial windfalls, companies should treat them as strategic assets. That means using tokens to support network development, incentivize community participation, or provide liquidity in decentralized markets.
DATs that adopt a more transparent and mission-driven approach could play a critical role in stabilizing the crypto ecosystem. They can become pillars of trust and liquidity, rather than sources of volatility and speculation.
Final Thoughts
While external economic factors continue to impact the crypto market, internal structural issues—particularly the behavior of digital asset treasuries—are playing an increasingly pivotal role. As Professor Malekan warns, ignoring the influence of these entities risks misunderstanding the true forces behind the market’s movements.
For the crypto sector to mature, it must confront the unintended consequences of its own innovations. Only then can it build a foundation resilient enough to weather future storms.