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Fedor Shabalin

How Wall Street's Crypto Bet Blew Up

How Wall Street's Crypto Bet Blew Up
Fedor Shabalin

One of Wall Street’s biggest money makers has blown up. Public companies that bought cryptocurrency have seen their stock prices plummet.

“Investors took a look and understood that there’s not much yield from these holdings, compared to just sitting on this pile of money, and that’s why they contracted.
— Fedor Shabalin

Shabalin is an analyst who covers these crypto-owning companies, called “digital asset treasuries,” for B. Riley Securities.

Digital asset treasuries had outstanding performance for much of the year. Instead of making money the old-fashioned way, these companies spent as much cash as they could get their hands on to buy Bitcoin or other cryptocurrencies.

Then, they sat back and watched as investors rewarded them for this leveraged bet on an unusually volatile asset. Investors even pushed their share prices up much further than the value of the crypto they had purchased.

A company called Strategy Inc. invented this playbook, and more than a hundred other companies followed it. For executives struggling to make money in their real-world businesses, this trade was a license to print money. They could buy a dollar of Bitcoin and magically push their market cap up by $1.20, $1.50, or more. 

Not coincidentally, company leaders increased their personal net worth at the same time, by boosting the value of their stock and stock options.

SharpLink Gaming Inc. went through an almost pyrotechnic transformation. Revenue from SharpLink's online gaming operations was down, but when the company announced it would buy more than $400 million of the cryptocurrency called Ether, its share price soared by 2,600%.

Investing in digital asset treasuries never made much sense for the long term. It was more expensive for investors than simply buying the digital coin themselves. It may be that many investors were chasing the momentum, purchasing the stocks simply because their prices were rising quickly.

Peter Lynch may have put his finger on the crux of it years ago, when he said, "There seems to be an unwritten rule on Wall Street: If you don’t understand it, then put your life savings into it.”

Now, as 2025 winds to a close, the inevitable bust in digital asset treasuries may have arrived. SharpLink has fallen by 86% from its peak. In an ironic turn-about, a company once worth more than the cryptocurrency it holds is now worth less. 

Even sector leader Strategy Inc. is suffering. Things are so bad that cryptocurrency investors worry Strategy may have to start selling its Bitcoin. It took out debt to buy Bitcoin and is on the hook for interest payments.

The conclusion for investors is that leveraged purchases of cryptocurrency may not be a business model worth investing in. 

To learn more about crypto investing, get a copy of Number Go Up: Inside Crypto's Wild Rise and Staggering Fall, by Zeke Faux. This is a must-read book for anyone investing today.

You can also follow today’s Oracle, Fedor Shabalin, on LinkedIn. 

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