Galaxy Research describes a Darwinian phase for Bitcoin treasury (DAT) firms as the traditional equity-backed, leverage-driven growth model collapses when BTC NAV falls and market liquidity dries up, forcing a reevaluation of growth and survival strategies.

DAT stocks that once traded at premiums to NAV are now trading at discounts, with firms such as Metaplanet and Nakamoto posting average entry prices above $107,000 and turning unrealized gains into losses as Bitcoin prices remain well below those levels.

Strategy has raised about $1.44 billion to reassure investors about dividends and debt obligations during Bitcoin’s downturn, funding a cash reserve through a stock sale that covers at least 12 months of dividends and could extend to 24 months.

The broader context notes market chatter about the influence of large Bitcoin whales, presented as related background rather than central to the DAT analysis.

The core model broke because issuing new shares becomes dilutive when the stock trades below net asset value, turning potential upside into dilution as premiums disappear.

Embedded leverage creates extreme downside risk, with examples like NAKA down more than 98% from its peak, reminiscent of wipeouts seen in meme-coin markets.

Current drawdowns show stress across Strategy, Metaplanet, Semler Scientific, and Nakamoto, with Metaplanet shifting from large unrealized gains to significant unrealized losses.

Galaxy Research had warned that this pattern would emerge, and current dynamics confirm heightened dilution risk and balance-sheet scrutiny for investors.

Bitwise CIO Matt Hougan argues Strategy won’t be forced to sell Bitcoin to stay afloat if share prices fall, countering critics who say otherwise.

Bitcoin’s drop from around $126,000 in October to about $80,000 drove reduced risk appetite and liquidity, with a deleveraging event on October 10 wiping out futures open interest and weakening spot depth.

Galaxy outlines three potential paths: a prolonged period of compressed premiums and stagnation, solvency-driven consolidation or restructurings, or a recovery if Bitcoin hits new all-time highs—for liquidity-preserving firms that avoided over-issuance.

Strategy’s stance remains that it won’t be forced to sell Bitcoin to meet obligations, reinforcing the view with a counterpoint from industry observers.