While the cryptocurrency market experiences a downturn, companies that act as proxies for crypto assets are performing even worse. While crypto treasury companies experienced short-term price increases, the majority have not performed as well as the underlying assets they hold.

Current Crypto Market Conditions

The overall cryptocurrency market is experiencing a contraction. The global cryptocurrency market cap is down 2.2% in the past 24 hours, standing at $3.83 trillion. Most major tokens face pressure as investor sentiment weakens. Bitcoin (BTC) fell 2.1% to $109,252, a 6.6% weekly decrease. Ethereum (ETH) dropped 3.3% to $3,895, losing 13.9% over the week. Solana (SOL) is down 4.6% to $193.51, marking a 20.7% weekly drop.

Underperformance of Crypto Proxies

The strategy of companies holding Bitcoin on their balance sheets is facing a major test, as their stock prices are falling far behind the performance of Bitcoin itself. These "Bitcoin proxy" stocks are now trading at a discount, which raises questions about the viability of the entire model. Investors and traders took positions in crypto treasury plays, hoping that the treasury companies would outperform their underlying crypto assets. However, the negative price performance of these companies in 2025 has created fear that they may exacerbate the next crypto market downturn through forced selling to meet debt obligations.

Strategy Inc., the largest Bitcoin treasury company, is down about 45% from its all-time high of $543 per share during intraday trading in November. Comparatively, BTC is up about 10% since hitting a high of over $99,000 over the same month. Bitcoin has printed successive new highs since December, hitting an all-time high of over $123,000 in August, whereas Strategy has failed to reach a new all-time high in 2024 or even recapture its previous all-time high during the same time period.

Metaplanet shares have declined by about 78% since the all-time high of $16 in May. Metaplanet shares are swapping hands at about $3.55 at the time of writing. Bitcoin's price has declined by about 2% since May's high of over $111,000.

Analysts from Standard Chartered have noted that the collapse in the multiple on net asset value (mNAV), a metric tracking the enterprise value of a company in relation to its underlying assets, is contracting due to the increase in crypto treasury companies. Market saturation is seen as the main driver of recent mNAV compression. There are currently 140 public companies that have adopted a crypto treasury strategy.

Reasons for the Discrepancy

Several factors contribute to the underperformance of crypto proxies:

• Market Saturation: The increasing number of crypto treasury companies has led to market saturation, compressing the multiple on net asset value (mNAV).
• Investor Concerns: Investors are concerned about the sustainability of the digital asset treasury business model.
• Direct Exposure Preference: With capital flowing into spot Bitcoin ETFs and investor preference leaning toward direct exposure vehicles, the post-ETF launch environment has created a pricing regime where scale and operational strength no longer translate to equity outperformance.
• Company-Specific Risks: Strategy has no annual management cost, but investors take on potential dilution, corporate tax effects and governance risks.
• Broader Market Trends: The cryptocurrency sector experienced a downturn while stocks and bonds rallied on the back of heightened expectations for a Federal Reserve interest rate cut.

Risks of Investing in Crypto Proxies

Investing in Bitcoin proxy companies carries considerable risk. One of the most critical risks is the potential loss of the entire capital. The drop in stock prices below the value of their Bitcoin holdings could force some companies to sell their crypto to cover debts, potentially causing more strain on the market.

Alternatives to Crypto Proxies

For investors seeking exposure to Bitcoin, direct investment in Bitcoin or Bitcoin ETFs may be more suitable options. BlackRock's iShares Bitcoin Trust (IBIT) offers a cleaner, regulated route: a spot Bitcoin exchange-traded fund (ETF) backed by actual Bitcoin, built for institutional and retail investors alike. With BlackRock, investors get direct access to Bitcoin's price without worrying about wallets, keys, or corporate capital maneuvers.