Avalanche Treasury, a Nasdaq-listed company that holds Avalanche (AVAX) as a core asset, disclosed to the U.S. Securities and Exchange Commission that it is uncertain whether it can continue as a going concern. The warning comes as the stock has fallen more than 90% in a month and the company has suffered heavy losses from large AVAX investments, raising concerns about its financial health.

According to blockchain media outlet The Defiant on Tuesday, Avalanche Treasury said in a recently filed quarterly 10-Q report that "substantial doubt about the company's ability to continue as a going concern has not been alleviated."

The company trades on Nasdaq under the ticker symbol AVAT. The stock was above $10 in early June, but after its Nasdaq listing on June 11 the closing price fell to $1.85, and by the end of June it slid below $0.73, dropping to penny-stock levels. The share price fell about 93% in just a month, effectively collapsing the company's valuation.

Behind the plunge is a strategy that concentrated AVAX into the corporate treasury. The company announced a plan in October last year to build an AVAX treasury of up to $1 billion, then merged with special purpose acquisition company Mountain Lake Acquisition and listed on Nasdaq last month.

Avalanche Treasury invested about $265 million to buy AVAX, but the value of its holdings fell to about $123 million as of March-end this year. That means more than half of the value has evaporated compared with the purchase price.

The impact was fully reflected in results. Its operating subsidiary posted a net loss of more than $26 million in the first quarter this year, largely from fair-value losses on AVAX holdings.

Its financial structure is also cited as a burden factor. The company has pledged about 7.8 million of its total 13.8 million AVAX as collateral for loans. That means if prices fall further, its collateral buffer could shrink quickly.

As the share price decline and asset value contraction proceeded at the same time, its market capitalisation also fell sharply. Based on Yahoo Finance, Avalanche Treasury's market cap has now dropped below $30 million. Over the same period, AVAX has also fallen about 47% so far this year and is trading in the high $6 range.

The industry assesses this case as showing the risks of a listed-company model that concentrates digital assets as corporate treasury holdings.

That is because token price declines are reflected simultaneously in corporate asset values, earnings and share prices, and using collateralised borrowing can further increase financial burdens in a down market.

Companies that pursued similar strategies are also facing difficulties. Agriforce Growing Systems changed its name last year to AVAX One and announced a plan to buy up to $700 million worth of AVAX, but its market cap has now shrunk to about $43 million and its shares are down about 68% so far this year.

The market has also produced an analysis that using cryptocurrencies as corporate treasury assets can earn high valuations in a bull market, but in a bear market it has again been confirmed that asset values and corporate values can be shaken at the same time.

Meanwhile, the Avalanche Foundation and Ava Labs (Ava Labs), which lead the Avalanche ecosystem, had not issued a separate official position on Avalanche Treasury's going-concern warning and share price plunge as of the time of writing.