Asilbek's Blog

Let's Talk DATs: Digital Asset Treasuries

Let's Talk DATs: Digital Asset Treasuries — The "Holding Crypto, but Make It Publicly Traded" Trend

Let's dive into DATs—Digital Asset Treasury Companies. This whole concept has become a genuinely interesting (and frankly, massive) trend in the crypto industry lately. I did some solid research on this, starting with one of my favorite - the "indexed podcast". Let's uncover the secrets behind their popularity and exactly how these bad boys work.

So, What Even Is a DAT?

A DAT is essentially a publicly listed company that has decided its main specialty is hoarding an incredible amount of digital assets. The biggest star of this operation, of course, is Strategy Inc. (formerly the famous MicroStrategy—I guess they dropped the "micro" because their treasury holdings got decidedly macro).

You might be scratching your head, thinking, "Wait, how is their job—which is literally just holding crypto—profitable?" You could argue that you can just buy crypto yourself and hold it. And the answer is: Yes! And Yes! (But stick with me, there's a loophole.)

The Loophole: Why Buy the Share, Not the Coin?

To become a DAT, a company must be a publicly listed company, meaning its shares are sold on stock exchanges. That company loads up on digital assets, and as a result, its valuation rises because the company's value includes all those shiny coins they're holding. Accordingly, their share price takes quite similar trend to the digital asset they’re treasuring. It's almost like holding the asset... but with extra steps.

Here’s where the magic happens and the differences lie:

  1. Accessibility (or Lack Thereof): Crypto is still not easily accessible to everyone, and it’s still not considered a security that can be easily traded by every big player on the stock market. However, big institutions and ordinary folks can easily invest in the shares of a publicly traded company. Boom! Instant, regulated exposure.

  2. The Perpetual Money Machine (a.k.a., The Reflexive Loop): How does the share price keep going up and generating profit? It's simple, really: The DAT issues and sells new shares (raising capital). From those proceeds, they buy more crypto, which in turn increases their valuation, causing the share price to rise. It's a gorgeous feedback loop! My quick question is: How long can they keep this magnificent momentum up? I'm genuinely not sure, but let's watch the show.

Yield, Debt, and the Inevitable Sell-Off

Another reason this model works is that they can generate yield from the crypto they hold (like staking), which they then use to buy even more crypto. Or—and this is spicy—they can take on debt leveraged against their existing crypto assets to buy more. Hello, instant valuation increase! I think we can all agree, though, that at some point, they have to sell their assets to pay off their debts. That’s the fun part we all get to worry about.

There are a few companies becoming DATs for certain assets. The famous ones are Bitcoin DATs, naturally, and some people have started ETH DATs. Rumors are circulating that CZ is going to start BNB DATs. Honestly, at this point, anyone could start any DAT, but the question is, does the underlying asset keep the model sustainable? (Because a Dogecoin DAT sounds fun, but maybe not financially sound.)

All Right, Let's Talk Some Big Numbers

The biggest DAT holdings are BTC, ETH, and SOL, respectively, of course.

  • As of November 9th, the collective total crypto holdings in these companies amount to over $117 Billion!
  • The breakdown is incredible: Out of that, the vast majority is BTC (approximately $99b), with ETH and SOL making up the second and third largest chunks.
  • An interesting fact is that Strategy holds a staggering amount—around $66 Billion worth of digital assets, all of which is BTC. That is not "micro" at all.

In my opinion, DATs became seriously popular starting around July/August, and based on that data, the ETH and SOL DATs started growing in number since then.

The Million-Dollar Question

So now, the question is: Will we see more DATs for different crypto assets (can we get a XRP DAT?), or will this model collapse at some point?

Given the inherent leverage and reliance on the price premium, it certainly carries structural risks. But as long as institutional investors and retail traders want easy, regulated access to these assets, the DAT model will probably keep its seat at the table.

p.s. The numbers are from the Block treasuries charts