Altcoin Treasury Mania Pumps Stock Prices, But Underlying Tokens Remain Muted: Animoca

Stocks of companies that adopt an altcoin treasury strategy have surged, but the altcoins themselves do not show the same boost, according to Animoca Brands.

In a recent research report, the blockchain gaming and investment company noted that share prices rose an average of 161% on the day of the announcement. This momentum has been sustained, with gains of 150% one day later, 185% after seven days, and 226% after 30 days.

However, the report also revealed that many announcements focus on capital raising and planned altcoin purchases rather than completed transactions.

As a result, there has been no significant buying pressure to boost altcoin prices, indicating that the stock rallies may reflect investors speculating on companies’ intentions rather than actual market activity.

“Since the companies may not have initiated or completed their altcoin acquisitions within this timeframe, there was no actual buying pressure or influx of capital to potentially move the altcoin’s market,” Animoca Brands wrote.

For example, when Interactive Strength announced plans to buy FET on June 11, the token fell 5.1% that day, and had dropped 14.1% a month later, according to data compiled by the firm.

Mounting Risks

The report also lists several risks tied to holding altcoins in corporate treasuries. These include market volatility and leveraged losses, meaning that large price swings in altcoins can significantly impact a company’s finances, especially if it uses debt.

Moreover, liquidity and repayment challenges could also arise if altcoin prices stay low and bondholders demand repayment instead of converting debt to equity, the report notes. On top of that, there’s also a “collateral liquidation risk” if debt terms change or if companies use altcoins as collateral, potentially forcing sales at low prices.

“A severe crypto bear market could, in such cases, trigger margin calls, forcing the sale of altcoins at unfavorable prices and exacerbating the downturn,” Animoca Brands said.

Another risk is from “activist investors.” If a company’s stock trades below its net asset value for a long time, Animoca Brands says activists might push management to sell altcoins to close that gap. Altcoins themselves have “idiosyncratic risks,” such as lower liquidity than Bitcoin, technical problems, and governance issues stemming from centralization, the firm added.

The report compared this trend to Bitcoin (BTC) adoption by companies like Strategy, which has used Bitcoin’s scarcity and institutional demand to increase its valuation by issuing convertible debt and equity. The altcoin treasury approach attempts to follow this model, yet it faces more uncertainty due to altcoins’ early stage and volatility.

Animoca Brands said companies tapping into altcoin treasuries are “actively re-engineering their corporate identity and capital structure to capitalize on market demand.” However, whether the strategy holds up depends on continued investor interest and how altcoin prices perform, particularly in light of broader economic pressures such as inflation, interest rate fluctuations, and global macroeconomic uncertainty.

Some are already questioning the durability of the approach. In early July, The Defiant reported that VC firm Breed expects companies following Strategy’s Bitcoin treasury model to face serious trouble in the next bear market. As more firms copy Saylor’s playbook, Breed warns, the risk of failure increases, opening the door for better-capitalized players to scoop up distressed assets at a discount.