A wave of sell-offs has rocked stocks of companies holding large crypto treasuries, especially those tied to Ethereum and Solana. What initially appeared to be bullish momentum quickly reversed after regulatory filings allowed early investors to exit their positions, leaving retail investors grappling with steep losses.

In recent weeks, public companies like Upexi and SharpLink Gaming have experienced dramatic declines in share prices—over 60%—shortly after their SEC registration-of-shares filings became effective. These filings, while procedural, triggered a market reaction that highlights the fragile dynamics of crypto-based treasury strategies within public markets.

What Caused the Drop?

Both Upexi and SharpLink raised funds through a financing method known as PIPE—Private Investment in Public Equity. This strategy enables public companies to secure capital by selling stock privately to institutional or accredited investors, typically at a discount. However, those shares are not immediately tradable on the open market.

Once the SEC gives the green light to the company’s registration-of-shares filing, PIPE investors are free to sell. In the case of SharpLink, this approval came after shares had already risen more than 400% in value, creating a perfect setup for profit-taking.

Upexi’s Chief Strategy Officer, Brian Rudick, commented that such filings, while misunderstood by many retail investors, are actually long-term positives. They increase the available trading float and position the company for future capital raises, particularly if the PIPE included a standstill clause.

Still, the immediate impact was brutal. SharpLink’s stock tumbled nearly 70% in a matter of days, wiping out weeks of bullish sentiment. Upexi experienced a similarly sharp fall, effectively reversing much of its previous gains tied to crypto treasury announcements.

The PIPE Investor Game Plan

PIPE investors often operate with a short-term mindset. When a company’s share price soars after a crypto-related treasury update, the potential for quick profits becomes irresistible. But there’s also a competitive element at play—if one investor believes others are about to sell, they may rush to exit first, triggering a cascade of selling pressure.

This creates a feedback loop reminiscent of low-float crypto tokens. With limited liquidity and high expectations, any sudden change in market access or investor behavior can lead to volatile swings—up or down.

Taproot Wizards co-founder Udi Wertheimer likened the situation to a “token unlock” event in the crypto space. Before a registration-of-shares filing becomes effective, the stock behaves like a low-supply token—volatile and capable of dramatic price movement. Once the float increases, the air comes out of the balloon.

Strategy or Speculation?

The adoption of crypto treasury strategies by distressed or growth-hungry firms has been gaining traction. Following the footsteps of companies like MicroStrategy and Semler Scientific, newer entrants have piled into digital assets as a hedge, diversification move, or publicity play.

Ethereum and Solana are now among the most frequently mentioned digital assets in such strategies. But this tactic carries significant risk. The value of these treasuries can be highly volatile, and the linkage between share price and underlying digital asset holdings is not always direct.

Zach Pandl, Head of Research at Grayscale, cautioned investors that these products often behave like closed-end funds. “They can trade at premiums or discounts to the value of the crypto assets on the company’s balance sheet,” he said. In contrast, spot ETFs typically track the price of the token more closely, offering a more transparent path for traditional investors seeking crypto exposure.

Misunderstood Filings or Market Red Flag?

SharpLink’s Board Chairman, Joseph Lubin—also known for co-founding Ethereum and leading Consensys—called the SEC filing “standard” and criticized the market for misreading it. He urged investors to avoid jumping to conclusions, suggesting that the sell-off had less to do with fundamentals and more with herd behavior.

Still, the episode underlines an important reality: crypto treasury strategies do not guarantee long-term gains or investor confidence. While adding digital assets may provide balance sheet strength or narrative momentum, they also expose the company to a new set of market forces, including regulatory shifts, digital asset volatility, and shareholder dilution.

A Growing Trend with High Risk

Data from crypto analytics platform Coinperps shows that daily net inflows for Bitcoin ETFs alone have reached $500 million since April, indicating continued retail and institutional demand. However, this appetite does not always translate into stability for smaller public firms that pivot to crypto.

As more companies pursue Ethereum and Solana treasuries, PIPE structures and regulatory filings will continue to play an outsized role in shaping price movements. Unless firms can manage these dynamics carefully and build long-term business cases around their crypto strategies, they risk becoming another cautionary tale in the evolving landscape of digital asset adoption.

Closing Thoughts

The recent drop in crypto treasury stocks serves as a reminder of the fine line between innovation and speculation. For investors, understanding the mechanics of PIPE deals, SEC filings, and crypto asset volatility is essential before betting on the next firm to pivot toward a blockchain-based treasury.

While Ethereum and Solana remain strong contenders in the digital asset world, using them as corporate reserves brings a new layer of complexity to already volatile markets. Investors would do well to approach these stocks with caution, recognizing that long-term value creation requires more than a well-timed crypto purchase.