After a turbulent few weeks in the crypto market, Digital Asset Treasury (DAT) companies are facing scrutiny due to sharp declines in Bitcoin, Ethereum, and the broader market. The fear is that declining prices may force treasuries to dump crypto holdings to stay solvent. Companies that once traded at multiples of their mNAV are now struggling.

According to James Butterfill, Head of Research at CoinShares, the situation is fragile, but not doomed. If prices continue to slide, shorts could deepen their attack, leading to a forced-selling doom loop for DAT firms. However, Butterfill believes there is potential for an explosive short squeeze, especially with improving macro conditions and the possibility of a December rate cut.

Markets may be at a pivotal moment as speculation grows about a December rate cut, which could weaken the dollar, ease liquidity stress, and potentially trigger a rebound in digital assets. Even if a recovery occurs, the industry must address structural flaws such as shareholder dilution, high asset concentration, and lack of revenue in firms with large crypto treasuries.

Butterfill predicts a cleansing cycle for the industry, filtering out momentum-driven firms and rewarding those building real economic value. The future of DATs lies in returning to fundamentals, disciplined treasury management, credible business models, and realistic expectations about digital assets on corporate balance sheets. The winners of the next cycle will resemble the original vision of DATs.

If markets stabilize or turn upward, companies that held the line instead of liquidating may see a strong recovery. A December rate cut could serve as a catalyst for this potential turnaround. The industry must address structural weaknesses to regain credibility and attract investors looking for companies with diversified revenue streams and strategic use of digital assets.

Read more at Yahoo Finance: This December Could Decide the Fate of Digital Asset Treasuries: Here’s CoinShares’ Survival Warning