Editor's Note: From the political endorsement of the "Crypto President" to the rapid proliferation of DAT treasury companies, tokenized stocks, and high-leverage trading, the cryptocurrency industry is advancing toward the boundaries of traditional finance and public policy at an unprecedented pace. New products, new structures, and new capital pathways are constantly emerging. On one hand, they are portrayed as technological breakthroughs that enhance efficiency and reshape financial infrastructure; on the other hand, they are accumulating hidden concerns in areas such as lending, governance, and risk transmission.
As regulatory attitudes shift toward leniency and capital accelerates its entry, this experiment driven by policy, capital, and technology is gradually evolving from an internal industry issue into a structural matter that could impact the broader financial system.
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This summer, a group of executives pitched a business plan to Wall Street financier Anthony Scaramucci, who briefly served as an advisor to President Trump.
They wanted Scaramucci to join a publicly traded company with a rather peculiar strategy: hoarding large amounts of cryptocurrency to make the enterprise more attractive to investors.
I really didn't need much convincing, Scaramucci said. Soon after, he was publicly named as an advisor to three previously little-known companies all employing the same strategy. That conversation was quite straightforward.
But the enthusiasm didn't last long. This fall, the crypto market crashed dramatically, and the stock prices of all three companies Scaramucci was involved with plummeted, with the worst performer dropping over 80%.
These companies are part of a wave of crypto enthusiasm propelled by Trump. He has pushed the once relatively niche world of digital currencies into a significant position in the global economy. He declared himself the first Crypto President, ended regulatory crackdowns on crypto firms, publicly promoted crypto investments from the Oval Office, signed multiple pro-crypto legislations, and even launched a meme coin called $TRUMP.
Now, the consequences of this enthusiastic endorsement are becoming apparent.
This year, a series of new crypto businesses pushing boundaries have emerged, exposing more people directly to the highly volatile world of virtual currencies. Today, over 250 publicly traded companies have begun accumulating cryptocurrency, digital assets whose prices fluctuate in ways no different from traditional investments like stocks and bonds.
Simultaneously, a batch of companies has launched new products making it easier to allocate crypto assets in brokerage accounts and retirement plans. Industry executives are also lobbying regulators to approve tokens representing shares of public companies, to be traded on a stock market powered by crypto technology.
This wave of experimentation is already showing problems. In the past two months, the prices of major cryptocurrencies have crashed, sending companies holding large amounts of these assets into a free fall. Other new projects have prompted warnings from economists and regulators, who point to the accumulating risks.
One of the central concerns is the rise in lending. By this fall, public companies had taken out large loans to purchase crypto assets; meanwhile, the total value of investor bets on future coin prices exceeded $200 billion. Such trades often rely on leverage, which can yield huge profits if the direction is correct but lead to severe losses if wrong.
The industry's latest products also connect crypto assets to the stock market and other parts of the financial system, increasing the possibility of a chain reaction where a crypto crisis could spill over into the broader economy.
The line between betting, speculation, and investment has largely disappeared, said Timothy Massad, who served as Assistant Secretary for Financial Stability at the U.S. Treasury after the 2008 financial crisis. This worries me greatly.
White House Press Secretary Karoline Leavitt said Trump is making the U.S. the crypto capital of the world by driving innovation and economic opportunity.
Crypto industry executives argue that these new businesses demonstrate the technology's potential to reshape the outdated financial system. They see market volatility as a source of potential profit.
The risk is higher, but the potential return is also higher, said Duncan Moir, President of 21Shares, which issues various financial products making crypto investing more accessible. Our job is to bring these investment possibilities to more people.
All this experimentation has flourished under an unprecedentedly friendly regulatory environment for crypto firms. After years of litigation with the industry, the U.S. Securities and Exchange Commission (SEC) established a dedicated crypto task force in January this year, which has held dozens of meetings with companies seeking approval for new rules or products.
An SEC spokesperson said the agency is working to ensure investors have sufficient information to make informed decisions.
Many of these new businesses are connected in some way to the Trump family's expanding crypto empire, further blurring the lines between business and government.
This summer, management from Trump's crypto startup World Liberty Financial announced they would join the board of the publicly traded company ALT5 Sigma. Previously operating a recycling business, ALT5 Sigma now plans to raise $1.5 billion to purchase digital currencies.
The Deluge
The crypto circle has a name for this high-risk, high-emotion era ushered in by Trump's new administration: they call it DAT Summer.
DAT stands for Digital Asset Treasury companies, publicly traded companies whose core goal is to buy as much crypto asset as possible. According to crypto consulting firm Architect Partners, slightly less than half of these newly formed companies chose Bitcoin, the most well-known cryptocurrency, as their primary allocation; but dozens of companies announced they would hoard less famous coins, like Dogecoin.
This year, new digital asset treasury companies have been established every month, showing a clear growth trend.
These projects often follow a relatively simple operational model: a group of executives first identifies a little-known but publicly listed company—say, a toy manufacturer—that itself is interested in building a crypto asset reserve. Then, this team partners with the company, raises millions of dollars from wealthy investors, and uses these funds to buy digital currencies.
The core purpose is to give investors exposure to crypto price fluctuations indirectly by buying something that looks like a traditional stock. This is potentially a profitable business. Some investment funds and asset managers have been reluctant to buy cryptocurrencies directly, partly because the custody process is complex, costly, and frequently targeted by theft and hacking.
By investing in DATs (Digital Asset Treasury companies), money managers can outsource these cumbersome operations. But DATs have proven to be equally risky. Many of these companies were established hastily or are run by executives lacking experience in managing public companies. According to Architect Partners, these companies collectively have announced plans to borrow over $20 billion to purchase crypto assets.
Financial crises often start with leverage, said Corey Frayer, a former crypto advisor to the SEC, and what's being created now is a whole lot of leverage.
Indeed, some companies have already run into operational difficulties or management crises, causing losses for investors. For example, Forward Industries, a treasury company that heavily accumulated a token called Solana. In September, after raising over $1.6 billion from private investors, its stock price soared to nearly $40 per share.
Investors included Allan Teh from Miami, who invested $2.5 million in Forward on behalf of a family office.
At the time, everyone thought this strategy would definitely work, that asset prices would keep rising, Teh said.
But then the market corrected, and Forward's stock fell to $7 per share this month. The company subsequently announced plans to spend up to $1 billion buying back its own stock over the next two years, but this move did not stop the continued decline.
The music stopped. Now I'm starting to hesitate, should I get out? said Teh, who has lost about $1.5 million. How much loss am I ultimately going to take on these things? Forward declined to comment.
The surge in DATs has raised high alert at the SEC. Clearly, there is concern here, SEC Chairman Paul Atkins said last month in an interview at a crypto conference in Miami. We are watching closely.
However, this emerging corner of the crypto world has a powerful backer—the Trump family.
In August, World Liberty Financial announced that its founding team—including the president's son Eric Trump—would join the board of the publicly traded company ALT5 Sigma. The company plans to heavily accumulate WLFI, a token issued by World Liberty itself. (Currently, Eric Trump is listed as a strategic advisor and observer.)
This arrangement seemed poised to quickly bring profits to the Trump family. According to a revenue-sharing agreement published on World Liberty's website, a Trump family business entity would receive a portion of the profits from every transaction involving WLFI tokens.
But thereafter, ALT5 Sigma's operations began to deteriorate. In August, the company disclosed that an executive of one of its subsidiaries had been convicted of money laundering in Rwanda, and the board was reviewing other previously undisclosed issues. Soon after, ALT5 Sigma announced the suspension of its CEO and cut ties with two other senior managers.
Since August, the company's stock price has fallen 85%. A spokesperson for ALT5 Sigma said the company remains optimistic about the future.
Flash Crash
Much of the recent turmoil in the crypto market can be traced back to one night in October.
Driven by Trump's public support, the crypto market rose for most of the year. But on October 10th, the prices of Bitcoin and Ethereum suddenly crashed, dragging down dozens of other tokens.
It was a classic flash crash, with prices collapsing急剧坍塌 in an extremely short time.
The immediate trigger was Trump's announcement of new tariffs on China, which shook the global economy. But the key reason crypto asset prices were hit particularly hard was the high level of borrowing in the market.
On crypto trading platforms, traders can use their assets as collateral to borrow cash or add more leverage, making larger bets on digital currencies. According to statistics from crypto data firm Galaxy Research, in the third quarter alone, global lending based on crypto assets increased by $20 billion, reaching a record $74 billion.
The most aggressive and highest-risk crypto trading typically occurs in overseas markets. But in July, U.S. largest crypto exchange Coinbase announced it would launch an investment tool allowing traders to borrow up to 10 times the value of their holdings to bet on the future prices of Bitcoin and Ethereum.
Coinbase launched this product against the backdrop of federal regulators withdrawing previous guidance that restricted such high-leverage lending, making such operations possible again in the U.S.
The October decline did not trigger a systemic disaster like the one that destroyed the industry in 2022—when several major crypto companies went bankrupt consecutively. But it provided a clear preview of how a crisis that could engulf the entire crypto world might unfold.
Mechanically, lending amplifies losses during market downturns. Because when prices fall, exchanges are forced to sell clients' collateral assets—a process called liquidation—which often drives prices down further.
According to industry data tracker CoinGlass, on October 10th alone, at least $19 billion in leveraged crypto bets were forcibly liquidated globally, affecting 1.6 million traders. The liquidations were concentrated on overseas exchanges, including Binance, OKX, and Bybit.
The crash triggered a surge in trading volume, and some traders encountered technical issues when trying to move funds on major exchanges. Coinbase said it had noticed that some customers may experience delays or performance degradation when trading.
Derek Bartron, a software engineer and crypto investor from Tennessee, said his Coinbase account was frozen at one point. If I wanted to close my positions, I simply couldn't, he said. It felt like Coinbase almost locked everyone in their accounts, losing the ability to save their funds, forced to ride the roller coaster.
Bartron said that over the following days, he lost about $50,000 in crypto assets, partly because he couldn't sell his holdings at the desired time.
A Coinbase spokesperson responded that the company provides automated risk management tools that functioned normally, and the exchange remained operational throughout the event.
A Binance spokesperson acknowledged that due to a significant spike in trading traffic, the platform did experience some technical issues and said measures had been taken to compensate users.
Experiment
One summer evening, crypto entrepreneurs Chris Yin and Teddy Pornprinya went to the Kennedy Center for the Performing Arts in Washington for a black-tie formal reception.
It was a high-profile social occasion. Yin, wearing a tailcoat bought the night before, introduced himself to Vice President JD Vance, a former Silicon Valley investor; he and Pornprinya also spoke with Treasury Secretary Scott Bessent, a former hedge fund manager; and they took a photo with Trump, who gave a thumbs-up to the camera.
The two entrepreneurs were paving the way for another bold plan proposed by the industry this year: extending the underlying architecture of crypto technology to other financial areas.
For months, their startup Plume has been applying to U.S. regulators for permission to launch an online platform allowing users to purchase digitized tokens of real-world assets—these assets could be a company, a farm, or even an oil well.
In overseas markets, Plume's customers can buy shares of such products and trade them like any other token. But this service, called tokenization, exists in a legal gray area in the U.S. The reason is that U.S. securities laws, decades old, impose extremely strict regulatory requirements on any form of share sales.
The core purpose of these rules is to protect investors through mandatory disclosure, requiring stock issuers to publicly disclose detailed operational, financial, and risk information. Consequently, tokenizing real-world assets and trading them faces much higher compliance barriers in the U.S. than in overseas markets.
This year, tokenization has become one of the hottest concepts in the crypto industry. Industry executives believe that tokenized stocks could make stock trading faster and more efficient, creating a 24/7 global market where shares circulate continuously worldwide. Major U.S. exchange Kraken already provides a crypto-powered stock trading market for customers overseas.
In the crypto world, transactions are recorded on a public ledger, making it more transparent than traditional finance—industry executives say. It's traceable, auditable, said Kraken CEO Arjun Sethi. This is almost the opposite of risk.
Representatives from Kraken and Coinbase have met with the U.S. Securities and Exchange Commission (SEC) to discuss regulatory rules for tokenized assets; meanwhile, Plume is seeking a viable legal path to expand its business to the U.S. mainland.
However, this race to launch first has also worried current and former regulators, as well as heavyweight executives in traditional finance. In September, economists from the U.S. Federal Reserve System pointed out that tokenization could transmit financial shocks from the crypto market to the broader economic system and weaken policymakers' ability to maintain the integrity of the payment system during times of stress.
Nevertheless, SEC Chairman Paul Atkins expressed a positive attitude towards tokenized stocks, calling them a significant technological advancement. In May, at a tokenization industry roundtable, he said: The committee has considerable discretion under the securities law framework to make arrangements for the crypto industry, and I intend to push this forward.
To secure a favorable position, Plume's two founders, Chris Yin and Teddy Pornprinya, pursued multiple strategies: they met with the SEC's crypto task force in May; provided graphic content for a White House crypto report; and set up Plume's U.S. headquarters on the 77th floor of the Empire State Building.
This summer, at that black-tie reception in Washington, Trump's core aides seemed quite impressed with the two founders.
They knew about Plume, Pornprinya said. Everyone had heard of us.
A few weeks later, Plume announced another potentially key connection: a business partnership with the Trump family's crypto company, World Liberty.
