Bitcoin Firms Face the Boomerang Effect of Excessive Leverage: A Warning from the Crypto Trenches

Bitcoin's biggest players are learning a brutal lesson—what goes up on borrowed money must eventually come crashing down.

The Leverage Trap

For years, easy credit and sky-high confidence fueled a borrowing spree across major crypto firms. They stacked leverage to chase returns, betting the bull run would never end. It was a classic case of financial hubris—until the music stopped.

Now, the boomerang is swinging back. Overextended positions are unraveling, forcing painful liquidations and exposing fragile balance sheets built on debt. The very tool that amplified gains is now magnifying losses, creating a vicious cycle of selling pressure.

It’s a reminder that in crypto—just like in traditional finance—no one is immune to the laws of financial gravity. The industry’s rush to mirror Wall Street’s playbook included adopting its most dangerous habit: believing leverage is a substitute for sustainable growth. Some lessons, it seems, are only learned the hard way.

In brief

• The DAT model collapses with the bitcoin drop, making stock issuances unprofitable.
• Metaplanet shows 530 million dollars in unrealized losses since last October.
• Nakamoto, a former star, saw its stock plunge 98% in a few weeks.
• Strategy raised 1.44 billion dollars to guarantee its dividends during the crypto storm.

BTC down, companies under pressure: the great reversal of the DAT model

The DAT (Digital Asset Treasury) model was long seen as a performance machine. As long as the stock was worth more than the bitcoin held, companies could issue shares, buy BTC, and boost their capitalization. But since the drop, this virtuous circle has become a vicious circle.

Galaxy Research summarizes the situation bluntly:

The bitcoin treasury model is fundamentally a liquidity derivative. It works only when the equity trades at a premium to its BTC NAV. Once those premiums collapse, the entire flywheel reverses.

The bitcoin plunge triggered this break. Companies like Metaplanet or Nakamoto, which showed huge unrealized gains last fall, now show heavy losses. In December, Metaplanet showed about 530 million dollars in unrealized losses. 

The BTC price only falls by 30%, but these companies’ stocks have plunged by 98% for some. As Galaxy says, This price dynamic resembles the spectacular crashes observed in memecoin markets.

From glorified leverage to systemic risk: the amplified crypto effect

The crypto industry loves leverage. But when the wind changes, that leverage turns into a burden. This is the case for companies that bet big on bitcoin. According to Galaxy the same financial engineering that amplified the rise also exacerbated the fall.

Some companies bought BTC at over 107,000 dollars. Today, they are at a loss. Nakamoto shows a drop of more than 98%. This is no longer a pullback; it is disintegration. Meanwhile, stocks trade at a discount, making profitable issuance impossible.

To get out, three scenarios emerge. The most likely: premiums permanently compressed, with DAT stocks riskier than BTC itself. A second: consolidations or buyouts between strong firms and weakened companies. And finally, an optimistic scenario: a return to favor if BTC reaches new highs. But only those who managed prudently could benefit.

Bitcoin shakes companies, but the entire crypto industry wobbles

This crisis does not only hit BTC giants. Other cryptos like ETH or SOL, when held through companies, offer staking or lending options. But these alternative revenues have not prevented the general decline of confidence in the markets.

Liquidity decline and the October 10 shock—triggering a wave of forced sales on futures—amplified the panic movement. Many investors start doubting the viability of these ultra-exposed models. More than a simple price problem, it is a stress test on a large scale for the whole sector.

The example of Strategy is enlightening: the company raised 1.44 billion dollars to guarantee 12 months of dividends. Translation: cash becomes king again, even in crypto. Those who did not build reserves or overvalued their model are paying the price today.

5 figures that set the scene

• 92,119 dollars: current price of bitcoin (BTC); 
• -98%: Nakamoto stock drop since its peak;
• 530 million $: unrealized losses of Metaplanet in December;
• 107,000 $: average BTC purchase price for Metaplanet and Nakamoto;
• 1.44 billion $: cash reserve raised by Strategy to reassure markets.

If crypto companies are suffering, mining companies are not spared. Their stocks are crashing rapidly, sometimes down 50% in a few weeks. Between soaring energy costs, BTC drop, and falling premiums, extraction becomes a headache. The storm is therefore general on the crypto front.

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