3 Warning Signs Major Cryptocurrencies Are Trading at Unsustainable Premiums

Digital assets flashing classic bubble indicators as retail frenzy peaks.

Metrics Point to Overheating

Market capitalization ratios scream divergence from fundamental utility. Trading volumes suggest speculative mania—not organic adoption.

Institutional Positioning Turns Bearish

Smart money quietly exits while influencers pump 'generational buying opportunities.' Hedge funds increase short positions against top-tier assets.

Technical Analysis Shows Exhaustion

Multiple timeframe charts reveal weakening momentum across leading cryptocurrencies. Retail traders keep chasing green candles like Wall Street banks handing out free leverage.

The pattern looks familiar—just ask anyone who bought Beanie Babies or 1999 tech stocks.

The implosion of the DAT trade

In the crypto market, the one trade that captivated investors during the summer was the so-called DAT trade. DAT stands for digital asset treasury, and it has become a shorthand way to refer to publicly traded companies that do nothing but buy a specific cryptocurrency.

The best-known DAT companies are those that invest in Bitcoin. But during the summer, DAT companies emerged that hoard more speculative cryptocurrencies such as,(SOL 2.82%), and(XRP 0.42%).

As a crypto investor, all you had to do was keep an eye on which cryptocurrencies were getting all the attention from these DATs and then buy them. All of the sustained buying by these DAT companies was sure to send them higher. And indeed, the prices of Ethereum, Solana, and XRP soared during the summer.

Image source: Getty Images.

But here's the problem -- momentum for these DAT companies appears to be waning. They are no longer trading at a premium to their cryptocurrency holdings. In fact, according to K33 Research, a quarter of Bitcoin treasury companies are now trading below the value of their cryptocurrency holdings. That makes it close to impossible for them to raise new money from investors, and without a new infusion of cash, they can't go out and buy crypto.

Even worse, some of these DAT companies appear to be imploding. A notable example is(NAKA -8.73%), named for pseudonymous Bitcoin creator Satoshi Nakamoto. Shares of the company (formerly known as KindlyMD) recently tumbled 55%, and even its chief executive officer warned prospective investors to stay away.

Crypto market sentiment

Even after a Federal Reserve interest rate cut, sentiment in the crypto market has turned bearish. The easiest way to see this is by checking out the Crypto Fear & Greed Index. This index ranks sentiment in the crypto market on a scale of zero to 100. The closer the reading is to 100, the more bullish sentiment is. And the closer the reading is to zero, the more bearish sentiment is.

Right now, the reading is about 40. That's tipping into bear territory. And it's nowhere close to where it should be if crypto is about to go on a huge year-end rally. For example, the 52-week high for the index is 88. That occurred in November, when pro-crypto euphoria after the presidential election gripped the market and everyone thought bitcoin was going to hit $200,000 by the end of 2025.

One factor weighing heavily on market sentiment is the price of Bitcoin. Typically, as Bitcoin goes, so goes the market. So if Bitcoin is doing well, sentiment is usually positive. And if Bitcoin is struggling, then sentiment starts to turn bearish.

The problem right now is that Bitcoin has stalled. After hitting an all-time high of $124,457 in August, Bitcoin is down to about $110,000. And some traders are warning that Bitcoin may have further to fall. It's not out of the question that Bitcoin might dip below $100,000.

The price of gold

Finally, it's worth noting that Gold is having a moment right now. It's up nearly 45% for the year and is soundly beating the major cryptocurrencies. Bitcoin and Ethereum, for example, are both up only 17% for the year.

That raises a perplexing question: What do gold traders know that crypto traders don't? It could be that U.S. economic weakness is much worse than many people suspect and the price of gold is trying to tell us that. If that's the case, it's hard to see how traders are going to keep piling into risky, speculative cryptocurrencies. Instead, they will be hunkering down, deleveraging, and moving into more defensive positions.

So keep your eye on the price of gold, which is now trading at an all-time high NEAR $3,770 (as of Sept. 25). As long as gold is outperforming Bitcoin, crypto traders should be concerned.

In eight of the past 10 years, Bitcoin has vastly outperformed gold. The only exceptions were 2018 and 2022 -- the two years when Bitcoin cratered in value.

What to buy now?

The good news is that many of the top cryptocurrencies are still up big in 2025. Even with the recent pullback, Bitcoin, Ethereum, XRP, and solana are on track to turn in double-digit percentage gains. So maybe it's not quite time to panic.

However, if sentiment continues to drift lower in the crypto market, the only top cryptocurrency I'll be buying is Bitcoin. While Bitcoin can see steep declines every few years, it has proven remarkably resilient over the long haul.