Galaxy Digital Warns of DATCO Unwind Risk as Corporate Crypto Treasuries Top $100 Billion

A new report from Galaxy Digital has raised concerns about the rapid proliferation of Digital Asset Treasury Companies (DATCOs)—public companies that raise capital through equity issuance to purchase cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) for their corporate treasuries. 

According to Galaxy Digital, those firms now collectively hold over $100 billion in digital assets.

The strategy, pioneered by Michael Saylor’s Strategy (MSTR), is being copied at a rapid pace. At least ten new companies per week are reportedly adopting the DATCO model, driven by investor enthusiasm and a bullish crypto market.

Top 100 BTC treasury companies (Source: Bitcoin Treasuries)

The DATCO Playbook: Equity Premium Fuels Accumulation

The underlying mechanics of the DATCO model depend heavily on a sustained equity premium over net asset value (NAV). As long as a company’s stock trades above the value of its crypto holdings, it can issue new shares, raise capital, and buy more digital assets.

But Galaxy warns that this cycle is dangerously reflexive. If sentiment shifts, equity premiums could vanish—or flip into discounts—breaking the model entirely. Without this premium, companies lose the ability to issue profitable stock, which in turn halts their crypto accumulation.

Galaxy Digital Notes Historical Echoes: Investment Trusts of the 1920s

Galaxy Digital draws a stark historical parallel between today’s DATCO craze and the speculative frenzy of investment trusts in the 1920s. Back then, companies like Goldman Sachs Trading Corporation created similar reflexive loops—raising capital to buy more assets in a feedback cycle that ultimately collapsed in the 1929 crash.

Today, the “fear of missing out” on crypto exposure is creating a similar mania, Galaxy warns, with companies chasing short-term market hype rather than long-term fundamentals.

Structural Fragility: One Trade, Hundreds of Companies

While a handful of companies following this strategy might pose little systemic risk, Galaxy highlights the growing correlation between these firms and the underlying crypto markets. When hundreds of companies all make the same leveraged bet—raise equity, buy crypto, repeat—the structure becomes highly fragile.

Any downturn in crypto prices, investor confidence, or capital market conditions could trigger a cascade of redemptions and stock buybacks, forcing firms to sell crypto assets and exacerbating market declines.

Early Signs of Stress: Buybacks and NAV Discounts

Galaxy Digital points out that some DATCOs are already flirting with discounts to NAV. In such cases, companies may begin using their digital asset reserves or operating cash to buy back shares and close the discount arbitrage.

Bitmine, for example, has secured board approval to repurchase up to $1 billion in stock at management’s discretion. This indicates firms are already preparing for a reversal of the premium-driven growth model.

M&A Wave on the Horizon?

Should discounts become widespread, Galaxy predicts a wave of consolidation in the DATCO sector. Premium-valued players like Strategy could use their stock to acquire smaller DATCOs trading at a discount, effectively buying Bitcoin below market price. However, this strategy is only viable while the acquiring firm maintains its own premium.

Crypto Prices at Risk if DATCOs Unwind

Perhaps the most pressing concern raised in Galaxy’s report is the potential impact on the crypto market itself. Just as DATCOs have acted as a persistent bid for Bitcoin and Ethereum, redemptions or selloffs would create persistent outflows, placing downward pressure on prices.

ETH treasury statistics (Source: StrategicETHReserve)

The firm warns that even a pause in net accumulation could remove a major tailwind for the market, weakening the normalization of digital assets on corporate balance sheets.

If the DATCO trade unravels, Galaxy suggests the fallout could extend beyond corporate treasuries. An unwind could sour public equity markets on digital asset exposure more broadly, potentially slowing institutional adoption and dampening inflows into spot crypto ETFs.

“An unwinding of the DATCO trade could conceivably dull the public equity markets’ appetite for digital asset exposure of any kind,” the report concluded.

Conclusion

While the DATCO trend may still have room to grow, Galaxy Digital’s report is a cautionary tale of how a popular financial innovation can rapidly morph into a systemic risk. As more companies pile into this one-way trade, the crypto market—and broader financial system—could be increasingly vulnerable to a sharp reversal.