Expert Warns: XRP and SOL Treasury Plans by Small Firms Likely to be Scams

Statements regarding the establishment of crypto reserves amounting to hundreds of millions of dollars from small public companies are likely indicative of attempts to artificially inflate stock prices. This was asserted by Matthew Sigel, head of the digital assets department at VanEck, as reported by The Block.

«There are numerous insider pump-and-dump schemes. When the market cap is low and there’s no news about new anchor investors, I suspect it’s a scam,» he stated.

Sigel highlighted the issue back in May, commenting on a Bloomberg report about Addentax Group’s plans to acquire around $800 million in Bitcoin and TRUMP meme tokens. He pointed out that the market value of this U.S.-listed company, which is entirely run by Chinese interests, is merely $3 million.

At the beginning of June, Classover announced plans to raise $500 million to establish a corporate treasury reserve in Solana. This initiative expanded its funding for a digital asset purchase program to $900 million by issuing shares and convertible notes. At the time of writing, the firm’s market capitalization barely reaches $63.5 million.

Singapore’s Trident Digital announced its intention to raise $500 million to create the «world’s first corporate treasury in XRP.” The company aims to secure funding through the issuance of shares and other financial instruments. Its market valuation targeting the Web3 sector is approximately $16.2 million.

China’s Webus International outlined its plan for a $300 million XRP reserve in a report to the SEC, with the company valued at $60 million.

In the short term, nearly all the mentioned companies succeeded in boosting their stock prices. The switch to a crypto strategy had a particularly notable impact on DeFi Development. The firm reported an agreement to sell stock worth $5 billion to create a fund in SOL.

«As June began, DeFi Dev Corp remains focused on executing our Solana treasury strategy,» the company commented.

Since March, the firm’s capitalization rose from around $7 million to $379 million. RK Capital Management, which manages about $500 million, is the firm’s partner in the securities placement program.

Coinbase Institutional analysts have pointed out that the increasing prevalence of corporate reserves, mainly in Bitcoin, poses a systemic risk to the digital asset market.

This trend has been fueled by changes in financial accounting rules in the U.S. The new standards allow companies to report digital assets at fair market value.

Currently, 234 firms hold a total of 820,542 BTC, around 20 of which are utilizing a capital-raising model through debt instruments initially employed by Strategy Michael Saylor.

During periods of market stress, these companies may face forced sales to meet obligations, potentially triggering panic among investors.

An analyst using the handle Lowstrife compared the Strategy method to a financial pyramid, which is bound to collapse eventually.

Standard Chartered has also concluded that imitators of Strategy could ultimately serve as a source of selling pressure in the market.

Economist and author of the book «The Bitcoin Standard,» Saifedean Ammous warned that Bitcoin is approaching a peak in the current market. Based on historical data, the subsequent drop in cryptocurrency value could be as much as 80%, hence he advised corporate investors to assess their preparedness for such a scenario.

It’s worth noting that Changpeng Zhao, the founder of the largest crypto exchange Binance, also highlighted the risks associated with the widespread establishment of corporate reserves based on Bitcoin.