Crypto Treasuries at Risk of 50% Loss Due to PIPE Selling Pressure

Crypto treasury stocks face up to 50% losses as PIPE deal lock-ups expire, driving heavy selling pressure in the market.

Crypto treasury companies that have raised capital through private investment in public equity (PIPE) deals may face major losses. 

According to analytics platform CryptoQuant, these companies could see their stock prices fall by as much as 50%. The cause of this potential decline is the selling pressure that follows PIPE deals. As private investors are allowed to sell their shares, the market could experience a sharp price drop.

Risks Associated with PIPE Deals

PIPE deals have become a popular method for crypto treasury companies to quickly raise capital. These deals allow private investors to purchase new shares at a price lower than the market value. 

While this offers quick access to funds, it can lead to negative effects once the shares are sold.

CryptoQuant highlights that when investors sell the shares purchased through PIPE deals, the increased supply can pressure the stock price. 

The selling activity creates an “overhang,” which often causes a sharp drop in the stock price. As a result, many companies that used PIPE deals have seen their stock prices revert to the levels at which they issued their new shares.

Examples of PIPE Selling Pressure

Several companies have already seen the negative effects of PIPE deals on their stock prices. 

For instance, Kindly MD (NAKA), a medical company turned crypto treasury, saw its stock price rise to nearly $35 after announcing a PIPE deal. However, the price later dropped by 97%, reaching just $1.16, nearly the same as its original PIPE price of $1.12.

Similarly, other companies like Strive Inc. (ASST) and Twenty One Capital have faced significant price declines. Strive’s stock has fallen by 78% since its peak in May. These declines are attributed to the selling pressure from PIPE investors who are now able to sell their shares.

Potential for Further Declines in Crypto Treasury Stocks

The selling pressure from PIPE deals is expected to continue for many crypto treasury companies. 

Once the lock-up periods for PIPE investors expire, the companies may see further declines in their stock prices. CryptoQuant suggests that some stocks could fall by as much as 50% due to the upcoming selling.

The only factor that might prevent these declines is a sustained rally in Bitcoin prices. A strong increase in Bitcoin value could offer some support to crypto treasury stocks. Without such a rally, however, the ongoing selling pressure could lead to continued declines in stock prices for these companies.

As PIPE deals remain a common way for crypto treasury companies to raise capital, the risk of further losses remains a concern. Companies may face significant challenges in stabilizing their stock prices while navigating the effects of PIPE selling pressure.

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