Forget the AI bubble. Why investors should be wary of this year's frenzy for crypto treasuries.

Everyone wants to know if AI is a bubble, but there might be no clearer sign of market froth than this year's craze over crypto treasury strategies, and all of the things listed above are associated with the recent explosion of the trend. A quick recap:

• July: Bitmine Immersion announces an ethereum treasury play, with Fundstrat's Tom Lee to join the board. The stock soars 3,000% in five days.
• July: A little-known vape company sees its shares spike 800% after it says it's embarking on a BNB treasury play.
• September: A company that invests in soccer teams throughout Europe says it's going to start piling up solana. Its stock spikes 400%.
• September: Shares of a company called Eightco Holdings surge 5,600% on a plan to amass a trove of Worldcoin, the crypto associated with the eyeball-scanning project founded by OpenAI CEO Sam Altman. Wedbush analyst and tech bull Dan Ives joins the board.

The trend has roots stretching back to 2017, when a company seemingly unrelated to crypto slapped the word "blockchain" on its name and promptly saw its stock soar 500%.

Some observers this year, including crypto bull Mike Novogratz, were warning as early as August that the trend had peaked, but the flurry of new treasuries continued. For the most part, these firms are looking to replicate the success of Strategy, Michael Saylor's business software company that went all in on bitcoin in 2020 to stellar results for its share price.

There are now 172 publicly traded companies that have adopted bitcoin holding strategies, and 48 have cropped up in the last quarter alone, Cointelegraph reported this week.

Many companies were trading at penny stock levels before venturing into crypto. Many also had little or no previous business in digital assets. For investors, that should be a red flag, Chris Brodersen, managing director of Eisner Advisory Group, told Business Insider.

"I think there are companies that are looking at crypto as a means of saving their skins," Brodersen said.

He said that he sees parallels to the dot-com boom, when tiny stocks would surge as they announced new business on the internet, only to quickly fall again and burn investors eager to get exposure to the shiny new technology.

In Brodersen's view, investors need to carefully assess a company's actual business plans and strategy, as well as the digital assets it plans to hold.

Andrew Duca, founder of crypto tax platform Awaken Tax, thinks the bubble in the space has already formed.

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"Most digital asset treasuries aren't actually running on-chain businesses — they're just buying tokens and calling it 'strategy,'" he said. "That's how bubbles start: companies chasing trends without thinking through why they're doing it."

Fears about a bubble in crypto treasuries have been intensifying lately, as top tokens such as bitcoin and ethereum continue to trend downward, taking down shares of crypto holding companies with them.

Duca isn't surprised by this. "Companies are forced to sell, which accelerates the decline," he stated. "Confidence drops fast when people realize how many of these treasuries were basically token bets with no real strategy behind them."

Duca voiced similar concerns to Brodersen, noting the possibility that over-leveraged treasuries could trigger margin calls and liquidity crunches by marking down collateral.

So, what happens if the bubble bursts?

"If a bubble bursts, it will likely expose companies that adopted crypto treasury strategies purely as a lifeline rather than from genuine strategic interest in digital assets," Chris Kline, COO and cofounder of BitcoinIRA, predicted.

Kline added that, from his perspective, investors who will bear most of the impact are those who bought into the treasury craze without understanding the underlying financial health of the businesses.