Digital Asset Treasuries Face First Real Drawdown With Balance Sheets Under Pressure

Digital asset treasury companies (DATCOs) entered 2026 facing a materially different market environment than the one that supported their expansion in prior years.

Strategy Inc. (Nasdaq: MSTR), the largest corporate holder of Bitcoin, disclosed holdings of 713,502 BTC as of February 1, 2026. These were accumulated at a total cost of $54.26 billion, implying an average acquisition price of $76,052 per bitcoin. During Q4 2025, falling crypto prices led to $17.4 billion in unrealized losses under fair-value accounting and a $12.4 billion quarterly net loss.

Equity markets reacted sharply. Strategy’s stock declined 67%, triggering mark-to-market losses across institutional portfolios. U.S. public pension funds collectively saw approximately $337 million erased, with 10 of 11 funds down close to 60% on their exposure. These losses, while unrealized, have intensified political and fiduciary scrutiny around DAT exposure.

Ethereum-focused treasury strategies experienced similar optics. Bitmine (NYSEAMERICAN: BMNR), an Ethereum treasury company, was cited as carrying roughly $6.6 billion in unrealized ETH losses, prompting concerns that future liquidation could cap ETH prices.

Across both Bitcoin and Ethereum treasuries, the immediate takeaway is clear. Volatility in underlying assets now transmits directly into public equity markets, with balance-sheet accounting amplifying perception risk.

What Is Actually Happening Inside DATs

Despite the magnitude of reported losses, treasury fundamentals tell a more nuanced story.

Strategy raised $25.3 billion in 2025, significantly extending its capital runway. It also holds a $2.25 billion reserve, equivalent to roughly 2.5 years of dividend and interest coverage. Management emphasized that balance-sheet stress only becomes existential under extreme scenarios. CEO Phong Le stated that Bitcoin would need to fall to $8,000 and remain there for five to six years before restructuring or emergency capital measures become necessary.

Debt duration and liquidity buffers matter more than spot prices in this context. DATs are not mark-to-market vehicles in an operational sense; they are long-duration allocators structured around survivability across cycles.

Ethereum treasury operators have reinforced a similar framework. Bitmine Chairman Tom Lee noted that unrealized losses during drawdowns are inherent to treasury strategies designed to track and outperform crypto assets over full market cycles. Index-style exposure naturally absorbs volatility during downturns while preserving upside convexity during recoveries.

This framing aligns DATs more closely with long-term commodity or monetary asset strategies than with active trading vehicles.

Why This Matters for Markets

DATCOs now sit at the intersection of crypto, equity markets, and institutional capital allocation.

Their growth has translated crypto volatility into publicly listed balance sheets, making price action relevant to pension funds, insurers, and retail equity investors. The recent drawdown has revealed how sensitive this transmission mechanism can be when liquidity tightens.

At the same time, DATCOs have emerged as meaningful holders of supply. Strategy alone controls more than 3% of total Bitcoin in circulation, reducing free float and altering market structure over time. Ethereum treasuries contribute similarly by warehousing ETH outside of short-term trading venues.

This supply absorption function becomes increasingly relevant during periods of macro stress. While equities reprice rapidly, DATCOs tend to maintain their holdings, acting as slow-moving capital pools rather than reactive sellers.

The broader implication is structural. Crypto assets are increasingly embedded within traditional financial systems through treasury strategies, converting protocol-level volatility into corporate-level balance-sheet dynamics.

Value Capture and Embedded Optionality

The long-term value proposition of DATCOs extends beyond simple price appreciation.

Large, patient crypto holdings create optionality around future financial engineering. Convertible refinancing, yield generation, protocol-native monetization, and collateralized capital structures all become viable as markets mature.

Treasury holders have both the incentive and influence to support protocol upgrades that preserve asset integrity over multi-decade horizons. For investors, this introduces a layered return profile. Equity exposure reflects crypto beta, treasury strategy execution, and capital structure efficiency simultaneously.

Where Risk Resides

The risks surrounding DATCOs remain tangible and multifaceted.

Accounting volatility under fair-value standards can overwhelm earnings statements during drawdowns. Equity dilution risk rises if capital markets close or valuations compress. Regulatory and fiduciary scrutiny increases when public funds incur visible losses, even if long-term theses remain intact.

Market psychology also plays a role. DATCO equities tend to overshoot in both directions, reflecting narrative momentum rather than intrinsic treasury value. This dynamic can disconnect share prices from underlying asset economics for extended periods.

Liquidity mismatches remain the central risk variable. Treasury survivability depends less on price recovery timelines and more on the ability to service obligations without forced selling.

What Investors Should Watch Next

Several signals will determine the next phase for DATCOs.

Debt maturity schedules and refinancing flexibility will matter more than quarterly earnings. Liquidity buffers relative to fixed obligations will define downside resilience. Governance discipline around capital deployment and communication will influence institutional confidence.

Macro conditions also loom large. Sustained dollar tightening or prolonged risk-off regimes delay upside realization. Conversely, renewed monetary expansion amplifies the convexity embedded in DATCO structures.

Market attention is gradually shifting from accumulation headlines to balance-sheet mechanics. That transition favors well-capitalized operators.