*

Bitcoin slump diverting attention to lesser-known tokens

*

Private sales to investors raise at least $15 billion this

year

*

DATs hold significant crypto, potentially impacting coin

prices

By Hannah Lang

Nov 10 (Reuters) - As companies focused on stockpiling

bitcoin and other major cryptocurrencies come under pressure

amid market saturation and souring sentiment, new entrants are

pushing into less popular tokens, stoking worries over increased

volatility.

Buoyed by U.S. President Donald Trump's crypto-friendly stance

and inspired by the meteoric success of Michael Saylor's

Strategy, the number of publicly-traded companies

investing in cryptocurrencies in the hopes they will appreciate

has boomed.

As of September, there were at least 200 digital asset treasury,

or DAT, companies - mostly focused on bitcoin - with a combined

capitalization of around $150 billion, up over threefold from a

year earlier, according to an analysis by law firm DLA Piper.

More companies, many of them penny stocks seeking ways to

boost profits, are launching daily. But as bitcoin sags, they

are turning to esoteric, more volatile tokens in a bid to

amplify returns, according to a Reuters analysis of more than

three dozen company announcements.

RISKS AHEAD FOR INVESTORS?

In recent weeks, for example, Greenlane ( GNLN ), OceanPal ( OP )

and Tharimmune ( THAR ) announced plans to stockpile

BERA, NEAR and Canton Coin, respectively.

The trend illustrates how the often-volatile and speculative

world of cryptocurrencies is becoming more entwined with

traditional markets, creating potential hazards for investors.

"DATs are expanding towards more exotic and less liquid

cryptocurrencies, and that's exactly where the risk could be

much higher," said Cristiano Ventricelli, vice president and

senior analyst of digital assets at Moody's Ratings.

"When markets drop, there is more pressure on the equity of

these companies," Ventricelli added.

A VOLATILITY PIPELINE

Since April, many DATs have funded token purchases via

private placements or PIPEs - selling shares directly to private

investors - usually at a discount.

At least 40 DATs raised more than $15 billion combined via

PIPEs between April and November, only five of which were

focused on bitcoin, Reuters' analysis found. Bitcoin registered

a monthly loss in October for the first time since 2018.

Heavyweight crypto investors in these deals include

Winklevoss Capital, Galaxy Digital ( GLXY ), Jump Crypto, Pantera

Capital, Kraken and DWF Labs, public data shows.

While some institutional investors can buy tokens directly,

DATs offer the chance to leverage returns and let more cautious

investors gain crypto exposure through regulated public firms.

PIPEs allow companies to quickly access cash, but

shareholder dilution and the potential resale of shares when

lockup periods end often stoke stock price volatility. And

because many DAT companies are so reliant on PIPEs, they are

especially vulnerable when markets fall, say analysts.

That was evident on October 10 when markets slumped on renewed

U.S.-China tariff tension. BitMine, which stockpiles ether, fell

more than 11% and Forward Industries ( FORD ), which invests in Solana,

fell more than 15%. Strategy, which has funded purchases through

other means, fell nearly 5%.

"The hype has deflated since when the DATs first came to the

market. But I think it could come back," said Peter Chung,

research head of crypto-focused Presto Research.

An OceanPal ( OP ) spokesperson said its NEAR purchases offered

shareholders a way to benefit from the token's integrated AI

capabilities. Greenlane ( GNLN ) declined to comment.

Strategy, BitMine, Tharimmune ( THAR ), Winklevoss Capital, Galaxy

Digital ( GLXY ), Jump Crypto, Pantera Capital, Kraken and DWF Labs did

not immediately respond to requests for comment.

TRADING BELOW NET ASSET VALUE

Many DAT companies earlier this year traded at a premium to

their crypto holdings because investors believed they could use

their access to credit to purchase more tokens.

But as bitcoin has flagged and Strategy copycats flooded the

market, some are wobbling. At least 15 bitcoin treasury

companies were trading below the net asset value of their tokens

as of Friday, according to data from crypto publication The

Block.

Retail investors, who are big buyers of Strategy and other

high-profile bitcoin DATs, lost around $17 billion on these

trades, Singapore firm 10x Research estimated last month,

Bloomberg reported.

Some DATs focused on other large coins are also under

pressure. ETHZilla and Forward Industries ( FORD ) recently approved

share repurchases, a move typically aimed at propping up share

prices.

"I think most of these digital asset treasury companies will

wind up trading at a discount to the digital asset," said

Michael O'Rourke, chief market strategist at JonesTrading.

'ABSOLUTELY DECIMATED'

DAT companies hold 4% of all bitcoin, 3.1% of all ether and

0.8% of all solana, meaning their fortunes could have major

implications for coin prices, Standard Chartered analysts wrote

in a September note, adding they expected consolidation in the

space.

Kyle Samani, chairman of Forward Industries ( FORD ), said in a

statement that the company's buyback provides "flexibility to

return capital to shareholders when we believe our stock trades

below intrinsic value."

He and other DAT executives say their success will be rooted

in their ability to make smart investing decisions.

"You're betting on the management team to go do interesting

things, and that's what we're trying to do," Samani, who is also

co-founder of Multicoin Capital, which invested in Forward

Industries' ( FORD ) September PIPE, said in an interview.

An ETHZilla spokesperson said the company was

opportunistically repurchasing shares while its stock traded

below net asset value, and that while it holds a lot of ether,

it is mostly focused on putting traditional assets onto the

blockchain.

Likewise, other DAT companies are looking for new ways to

boost shareholder value. SUI Group ( SUIG ), which stockpiles

Sui, recently launched its own stablecoins, said Chairman Marius

Barnett.

If a DAT just sits back and only buys tokens, "long term,

you're going to get absolutely decimated," he added.