GD Culture's shares plummeted over 28% after announcing a deal to acquire all assets from Pallas Capital Holding, including 7,500 Bitcoin, in exchange for nearly 39.2 million new shares, marking a significant strategic shift.

This acquisition made GD Culture the 14th largest corporate Bitcoin holder globally, surpassing Galaxy Digital, and aimed to build a diversified digital asset reserve.

Market reaction was negative, with GD Culture's stock dropping to $6.99—its lowest in over a year—and its market cap shrinking from a high of $235.80 in February 2021 to $117.4 million.

While Bitcoin treasury strategies can strengthen balance sheets and hedge against inflation, their high volatility presents substantial financial risks, especially amid uncertain regulatory environments.

The trend of corporate Bitcoin holdings has surged in 2025, with over 190 public companies managing more than 1 million BTC collectively, led by Michael Saylor's MicroStrategy, which holds 636,505 BTC.

This surge reflects growing acceptance of crypto as reserve assets, with the total value of corporate Bitcoin holdings reaching approximately $112.8 billion, dominated by Saylor's firm with a 68% share.

However, the increasing correlation between Bitcoin and traditional markets means broader market shocks can impact Bitcoin prices, complicating risk management for companies holding crypto assets.

In May, GD Culture announced a plan to raise $300 million through stock sales to fund its crypto treasury strategy, including Bitcoin and Trump tokens, following a Nasdaq warning about low stockholder equity.

The recent deal involved issuing 39.2 million shares to acquire Pallas Capital's assets, including Bitcoin, as part of a broader strategy to diversify and strengthen its digital asset reserve.

The announcement of share issuance to finance the Bitcoin purchase caused significant stock dilution concerns, leading to a decline from a 9% to nearly 29% in stock value, with investors worried about capital erosion.

Market skepticism persists regarding equity-based funding strategies, with analysts warning that such capital raising can be risky if asset valuations decline or investor sentiment shifts.

GD Culture's CEO Xiaojian Wang emphasized that the Bitcoin acquisition aims to leverage crypto as a reserve asset for long-term growth, stability, and diversification, aligning with institutional acceptance.

Bitcoin's annualized volatility around 35.5% significantly exceeds traditional assets like the S&P 500 at 7.9%, increasing the risk of large unrealized gains or losses for companies holding substantial Bitcoin reserves.