Crypto Current #92

Financial markets have an uncanny ability to rediscover the same structures under new names. Today's Digital Asset Treasury (DAT) companies—from Strategy's pioneering model to the dozens of new entrants flooding NASDAQ—are following a remarkably familiar playbook. For those who witnessed the Listed Investment Company (LIC) and Listed Investment Trust (LIT) booms of previous decades, the current DAT phenomenon isn't revolutionary finance. It's history rhyming with stunning precision.

The market's current analysis of DATs suffers from acute performance bias. Those who profited from early positions champion the structural advantages, while those who missed the initial run dismiss the entire category as unnecessary intermediation. Both perspectives miss the nuanced reality: DATs represent legitimate financial innovation with asymmetric value creation potential—but only for vehicles that combine skilled management, conservative capital structures, and defensive characteristics during inevitable market stress.

What's happening in crypto?

Crypto markets retreated after last week’s rally, which pushed Bitcoin to a new all-time high near $124,000. Sentiment was pressured by macro headwinds, including a higher-than-expected inflation print and diminishing depth of future rate cuts, weighing on both crypto and broader risk assets. Amid the pullback, Kanye West’s $YZY coin debuted on Solana, briefly reaching a $3bn fully diluted valuation (FDV) before sliding to ~$800m FDV. Most top-100 assets finished lower week-on-week, though standouts included $MORPHO (+13%) and $LINK (+9%).

Chart of the week

Growth in ETH DATs has been Tommy-tastic - in reference to Bitmine ($BMNR) Chairman Tom Lee's $5bn ETH bet.

Crypto Treasury Companies_ Share of Crypto Asset Held Blockworks Research

Source: Blockworks Research

The eternal return: DATs as the latest investment trust iteration

Historical patterns don't lie

The current excitement around Digital Asset Treasury companies follows a script written decades ago. In the 1990s, Aberdeen and other fund managers launched dozens of investment trusts, promising superior access to developing economies and specialized management expertise. The 2000s saw Australian resource-focused LICs proliferate during the commodities boom. Each wave promised the same fundamental advantages: permanent capital, professional management, and structural benefits over direct ownership.

The parallels are striking. Like their predecessors, DATs offer "permanent capital" that protects managers from redemption pressure during volatile periods. They promise sophisticated treasury management that individual investors cannot replicate. Most importantly, they create the potential for shares to trade at premiums to underlying net asset value (mNAV)—the holy grail that transforms a simple holding vehicle into a wealth creation mechanism.

The performance bias problem

Current market discourse around DATs is dominated by performance bias rather than structural analysis. Those who participated in MicroStrategy's epic run from $100 to over $400 per share naturally emphasize the strategy's brilliance. Those who watched from the sidelines focus on the apparent irrationality of paying premiums for leveraged crypto exposure when ETFs exist.

Both groups miss the critical nuance. DATs aren't universally value-creating or value-destroying. Success depends entirely on timing, execution, capital structure, and management quality. The vehicles that survive and thrive will share characteristics with successful LICs and LITs from previous eras: conservative leverage, defensive positioning during downturns, and management teams capable of navigating extended periods of discount to mNAV.

Education gap: Understanding the DAT structure

Many institutional investors familiar with Strategy may not fully grasp the broader DAT phenomenon now emerging. Unlike passive ETFs, these are actively managed companies using equity and debt financing to accumulate crypto assets. The key mechanism is premium capture: when shares trade above mNAV, companies can issue new equity at prices above the underlying asset value, increasing the crypto holdings per share.

This differs fundamentally from ETFs in three critical ways: leverage amplifies both gains and losses, active management can add or destroy value, and permanent capital structure eliminates redemption pressure that often forces sales at inopportune times.

Quality differentiation

Despite Bitcoin's choppy price action over recent periods, select DAT’s have increased its Bitcoin-per-share ratio through disciplined premium capture and strategic financing. When shares traded at significant premiums, management issued equity to acquire more Bitcoin. When trading at discounts, they prioritized debt financing or remained patient. The recent signal from Strategy’s management is particularly telling, as the company quietly backtracked on its previous 2.5x mNAV limit to enable at-the-market (ATM) equity offerings – suggesting that attempts to jawbone share price higher didn’t work. This pivot demonstrates the practical reality facing even quality DAT managers: market dynamics ultimately dictate premium/discount cycles regardless of management rhetoric.

This contrasts sharply with newer entrants rushing to market with aggressive fee structures and speculative positioning. According to BitMEX Research, advisory fees for some recent DAT launches range from 0.75% to 2.0% annually on assets under management, with additional equity incentives that can reach 5-12% of total company equity. These fee burdens make it mathematically difficult to generate meaningful alpha over direct crypto ownership.

The fee comparison is instructive. While DAT proponents sometimes argue they offer lower costs than crypto ETFs, the reality is more complex. Quality DATs with experienced management and conservative structures may justify their fees through superior risk management and premium capture. Fee-heavy structures designed primarily to enrich sponsors will likely struggle to deliver value over full market cycles.

The asymmetric reality

Despite widespread skepticism, well-structured DATs can create genuine asymmetric value for sophisticated allocators. The "permanent capital" advantage is real during volatile periods when forced sellers create opportunities. Skilled treasury management can add value through timing, financing optimization, and strategic positioning.

However, as Raoul Pal noted in a recent X post highlighted below, long-term success will largely depend on who has a bear market strategy. Those without defensive positioning may face forced liquidations during downturns. Those with conservative structures and experienced management can potentially compound through volatility cycles.

Crypto-specific dynamics

The DAT phenomenon introduces unique dynamics to crypto markets that don't exist in traditional asset classes. As treasury companies and ETFs reduce on-chain transaction activity, this affects Proof-of-Work (PoW) and Proof-of-Stake (PoS) networks differently.

Bitcoin loses fee revenue as transactions move off-chain to institutional custody arrangements, potentially straining miner economics over time. PoS networks like Ethereum are less affected by reduced transaction volume since validator rewards come primarily from network inflation rather than transaction fees. This divergence may influence institutional preferences toward PoS assets for treasury strategies.

Strategy’s 2025 YTD mNAV premium, currently trading at c.1.5x.

Source: Strategy Tracker.

The inevitable pattern

LIC and LIT booms have followed the same trajectory. Initial enthusiasm drives premiums as performance bias dominates analysis. Successful vehicles attract imitators with progressively weaker structures and higher fees. Eventually, market maturation leads to premium compression, leaving only the highest-quality managers with defensible competitive advantages.

Most investment trusts from previous booms became expensive ways to own underlying assets, trading at persistent discounts while generating steady fee income for managers. A select few survived by demonstrating consistent value-add through complete market cycles.

The DAT space is following this pattern precisely. Early movers like Strategy established proof-of-concept. Now dozens of imitators crowd the market with varying quality levels. The eventual shakeout is predictable: fee-heavy structures will become zombie companies, while quality managers with conservative positioning will build sustainable businesses.

Institutional implications

We believe the DAT phenomenon requires moving beyond performance bias toward structural analysis. The key questions aren't whether DATs deserve premiums or discounts, but which specific vehicles combine management quality, capital structure discipline, and defensive characteristics necessary for long-term success.

The opportunity exists for allocators capable of identifying quality DATs during periods of market stress when discounts provide attractive entry points. However, this requires the same due diligence applied to traditional investment managers: track record analysis, fee structure evaluation, and assessment of management's ability to navigate full market cycles.

The current environment, with dozens of DAT launches and varying quality levels, resembles the peak of previous investment trust booms. History suggests that patient allocators willing to wait for quality vehicles trading at discounts will be rewarded, while momentum-driven approaches may face disappointing outcomes as market dynamics normalize.

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Established in 2017, DACM is an institutional investor focused on the digital asset sector. Our team invest across the digital asset sector, from early-stage venture partnerships to listed and derivative markets. DACM has developed a fundamental investment philosophy designed for family office and institutional investors, tested across multiple market cycles.

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