- Small-cap firms announce crypto purchases worth hundreds of millions despite tiny market caps.
- VanEck’s Matthew Sigel warns that these announcements are coordinated stock manipulation schemes.
A series of dubious cryptocurrency treasury announcements by small-cap firms has caused caution among digital asset specialists. VanEck associate Matthew Sigel is skeptical that numerous recent announcements of huge crypto buy-ins are not business plans but rather organised efforts to artificially boost stock prices.
A number of penny stock firms have made ambitious plans to buy hundreds of millions of dollars worth of cryptocurrencies. However, this generates concerns as these companies have very low market capitalisations. These are usually companies in poor financial standing stating that they will buy XRP, Solana, or Bitcoin at quantities that are much higher than their present value.
The trend has been more apparent to market watchers. Companies that are less than $100 million market cap are declaring treasury plans of $300-800 million, which is causing mathematically impossible situations. Trident Digital Tech is another project that has continued this trend, suggesting a half-billion-dollar XRP treasury, despite having a mere $16 million market cap.
Warning Signs Point to Coordinated Manipulation
Sigel points out some red flags indicating that these announcements are fraudulent. The firms that make such claims usually do not have any established connections in the cryptocurrency industry. Additionally, they often lack the financial resources to implement their claimed roadmaps. The announcement times are also suspiciously aligned with recent rallies in the crypto market, indicating opportunistic conduct.
Most of these schemes involve insider pump and dump attempts as analyzed by Sigel. It is probably a case of insiders of the company colluding on when to announce something to artificially whip up enthusiasm. This causes the price of shares to rise, and then they sell their shares at overvalued prices.
Another alarming case of this trend is Addentax Group. The Chinese clothing manufacturer announced that it would buy $800 million worth of Bitcoin and TRUMP tokens. However, its market capitalization was several million dollars at best.
DeFi Development Corp has gone to such an extent as to announce a plan to sell 5 billion worth of shares to buy Solana. The market cap of the company increased to 379 million from 7 million after the announcement. This shows the extent to which such tactics can be used to control the mood of investors.
Such unrealistic treasury announcements have also been made by Classover Holdings and Webus International. Both firms said they were raising hundreds of millions to buy cryptocurrencies, but their market capitalizations were both less than $100 million.
Industry watchdogs advise taking such announcements with a huge grain of salt.
Investors are advised to check the financial statements of companies. They should also assess the realistic funding potential before investing in companies on the basis of cryptocurrency treasury holdings.
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