The Year’s Hottest Crypto Trade Is Crumbling

The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.

It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.

Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.

The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.

Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.

“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”

When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.

BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.

ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.

Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.

A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.

Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.

“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”

At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.

Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.

Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.

But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.

“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.

Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.

Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.

Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.

“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.

Apple has dominated the electronics supply chain for years. No more.

Artificial-intelligence companies are writing huge checks for chips, memory, specialised glass fibre and more, and they have begun to out-duel Apple in the race to secure components.

Suppliers accustomed to catering to Apple’s every whim are gaining the leverage to demand that the iPhone maker pay more.

Apple’s normally generous profit margins will face pressure this year, analysts say, and consumers could eventually feel the hit.

Chief Executive Tim Cook mentioned the problem in a Thursday earnings call, saying Apple was seeing constraints in its chip supplies and that memory prices were increasing significantly.

Those comments appeared to weigh on Apple shares, which traded flat despite blowout iPhone sales and record company profit.

“Apple is getting squeezed for sure,” said Sravan Kundojjala, who analyses the industry for research firm SemiAnalysis.

AI chip leader Nvidia recently became the largest customer of Taiwan Semiconductor Manufacturing , or TSMC, Nvidia Chief Executive Jensen Huang said on a podcast.

Apple had been TSMC’s biggest customer by a wide margin for years. TSMC is the world’s leading manufacturer of advanced chips for AI servers, smartphones and other computing devices.

Spokesmen for Apple and TSMC declined to comment.

The big computers that handle AI tasks don’t look like the smartphones consumers own, but many companies supply components for both. In particular, memory chips are in short supply as companies such as OpenAI, Alphabet’s Google, Meta , Microsoft and others collectively spend hundreds of billions of dollars to build AI computing capacity.

“The rate of increase in the price of memory is unprecedented,” said Mike Howard , an analyst for research firm TechInsights.

That applies both to the flash memory chips that store photos and videos, called NAND, as well as the memory used to run apps quickly, called DRAM.

By the end of this year, the price of DRAM will quadruple from 2023 levels, and NAND will more than triple, estimates TechInsights.

Howard estimates that Apple could pay $57 more for the two types of memory that go into the base-model iPhone 18 due this fall compared with the base model iPhone 17 currently on sale. For a device that retails for $799, that would be a big hit to profit margins.

Apple’s purchasing power and expertise in designing advanced electronics long made it an unrivaled Goliath among the Asian companies that make most of the iPhone’s parts and assemble the device.

Apple spends billions of dollars a year on NAND, for instance, according to people familiar with the figures, likely making it the single biggest buyer globally. Suppliers flocked to win Apple’s business, hoping to leverage its know-how and prestige to attract other customers.

These days, however, “the companies now pushing the boundaries of human‑scale engineering are the ones like Nvidia,” said Ming-chi Kuo, an analyst with TF International Securities.

Demand for AI hardware is poised to keep growing rapidly. Apple’s spending growth is modest in comparison with what is being spent to fill up AI data centers, even though it is breaking records with huge sales of the iPhone 17.

Samsung Electronics and SK Hynix are raising the price of a type of DRAM chip for Apple, according to people familiar with Apple’s supply chain.

Big AI companies pay generously and are willing to lock in supply and make upfront payments, giving the South Korean chip makers leverage against the iPhone maker.

Apple signs long-term contracts for memory, but it has used its heft to squeeze suppliers.

Its contracts have empowered it to negotiate prices as often as weekly, and to even refuse to buy any memory from a supplier if Apple didn’t view the price as favorable, according to people familiar with its memory purchases.

To boost leverage with suppliers, Apple even began stocking more inventory of memory. That was atypical for Cook, who normally cuts inventory to the bone to maximize Apple’s cash flow.

Apple is fighting not only for current deliveries but also for the attention of engineers at suppliers.

Glass scientists who worked on developing the smoothest and lightest smartphone displays are now also spending time on specialised glass for packaging advanced AI processing chips, according to industry executives.

Makers of sensors and other gizmos inside the iPhone are winning new business from AI companies such as OpenAI that are developing their own hardware.

Still, suppliers said they were far from giving up on business with Apple. Working with Apple is a form of education, they said, because it remains one of the most demanding and disciplined customers in the industry.

TSMC, the Taiwanese chip manufacturer, has built successive generations of its most advanced chips with Apple as its lead customer, relying on the big predictable demand for iPhones.

Now that TSMC is doing more business with Nvidia and other AI companies, people with knowledge of the chip supply chain said Apple was exploring whether some lower-end processors could be made by someone other than TSMC.

One of Apple’s biggest profit-spinners is selling extra memory for far more than the memory chips cost the company.

Last fall Apple discontinued the iPhone Pro model with 128 gigabytes of storage.

Customers who want that model must now start at 256 gigabytes and pay $100 more—the type of move that could be repeated this year to help Apple offset higher costs, wrote Craig Moffett, an analyst at Moffett Nathanson, in an investor note.

However, Apple isn’t expected to raise the price of its next iPhone models over similarly equipped iPhone 17s, said Kuo, the analyst.

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The Year’s Hottest Crypto Trade Is Crumbling

Selloff in bitcoin and other digital tokens hits crypto-treasury companies.

Parts for iPhones to cost more owing to surging demand from AI companies.