DATs are centered around crypto assets, bringing revolutionary opportunities to the capital markets.

Author: BowTied Bull

Translation: Baihua Blockchain

Abstract

• DATs are positive for responsible cryptocurrency adoption and will exist long-term.
• DATs have institutional attributes and will become the next generation of asset management companies.
• DATs are not Ponzi schemes and will ultimately integrate as managers of the crypto ecosystem.
• Ethereum (ETH) is the best asset for DATs, combining the upside potential of value storage with the most powerful yield-generating economy.

Who are DAT?

This movement began with Strategy (formerly MicroStrategy) — the earliest form of Digital Asset Treasury (DAT). Michael Saylor and the Strategy team keenly realized that transforming their publicly traded stable software company into a Bitcoin-holding company could unlock access to capital markets, achieve a complete brand overhaul, and most importantly, bring about significant market capitalization growth.
This strategy has achieved unimaginable success:

• In just five years, Strategy's market capitalization grew approximately 80 times (in contrast, Bitcoin's price grew about 10 times), with its stock trading at a 1.4 times premium relative to the value of its Bitcoin holdings, continuously creating new forms of capital and growth opportunities.
• This is the magic of capital markets, realized by the publicly traded company Strategy (MSTR) adopting Bitcoin as a reserve asset through the DAT model.

In hindsight, this was inevitable.

Why DAT?

Given the tremendous success of Strategy, the explosive growth of DATs is not surprising. The only surprising aspect is how long it took for this model to expand beyond Bitcoin to other digital assets.
Looking at the bigger picture, the concept of DAT is not entirely new. In the U.S., there are about 800-1000 publicly traded asset management companies, including Business Development Companies (BDCs) investing in private assets, Real Estate Investment Trusts (REITs) investing in real estate, closed-end funds across asset classes, and alternative asset management companies (raising equity, hedge funds, and credit funds).
These tools have built public market wrappers around their underlying assets, charging management fees, and have various market capitalizations, capital market access, and management styles. The reason these asset management companies exist is the same as the reason DATs exist: human nature.
In short, people do not want to manage assets themselves!
Owning a part of a REIT is easier than owning rental properties, managing tenants, collecting rent, and performing maintenance. Owning a part of a raised equity fund is easier than buying cash flow companies, increasing debt, cutting costs, and flipping assets.
Similarly, in an ideal world, people would self-custody crypto assets, navigate yield opportunities across decentralized finance (DeFi), and regularly deploy and rebalance.
Or, they could simply own a part of a DAT. History often repeats itself.

Why now?

Until 2025, cryptocurrencies were not warmly welcomed in the U.S. The U.S. has the most powerful and robust capital markets in the world, but previously, it was effectively closed to publicly traded crypto companies. Worse still, most crypto assets (except Bitcoin) were in a deliberately created gray area, oscillating between securities and commodities.
As the U.S. adopts a more friendly and innovative attitude towards digital assets, the DAT movement officially began, first with a surge of Bitcoin DATs, followed by Ethereum DATs, and then other altcoin DATs.

How do DATs work?

DATs are very simple. A publicly traded company (either an existing company or a SPAC) raises funds from investors (usually through a PIPE, or private investment in public equity). Then, this publicly traded company announces its intention to become a treasury vehicle, discloses its chosen crypto assets as treasury assets, outlines its strategy, and uses the raised funds to purchase a significant amount of that crypto asset.
Assuming the value of the company's other parts (traditional business, or zero business of the SPAC) is approximately zero, the publicly traded market capitalization of the DAT should theoretically equal the net asset value (NAV) of its crypto assets.
However, an interesting phenomenon occurs where the market capitalization of the DAT often diverges from its underlying NAV. For example:

• An existing company raises $1 billion and purchases $1 billion worth of Ethereum. Its traditional business is valued at approximately zero.
• The company's Ethereum NAV is $1 billion, so its publicly traded equity market capitalization should theoretically be $1 billion.
• However, the actual market capitalization on the public trading platform might be $1.2 billion, creating a market capitalization to net asset value ratio (mNAV) of 1.2. This is because investors are sometimes willing to pay a premium to hold shares of a publicly traded company rather than directly holding the underlying Ethereum asset, as explained in the previous "Why" section.

This mNAV premium can turn into a discount, so all DATs ultimately play the "mNAV game." Again, using Ethereum as an example:

• If mNAV is greater than NAV (>1), the company will sell more shares in the market (through an ATM, or at-the-market issuance) and use the proceeds to build cash reserves or purchase more Ethereum, thereby increasing the concentration of Ethereum per share.
• If mNAV equals 1, the company can use available cash (or issue debt) to repurchase shares, increasing the concentration of Ethereum per share.
• Some companies will issue debt (bonds, convertible bonds) to purchase more Ethereum regardless of mNAV, increasing the concentration of Ethereum per share.

Ultimately, as the number of Ethereum per share increases, DATs become a more concentrated and potentially more effective way to increase exposure to Ethereum assets. Equally important, this can be achieved through publicly traded market tools in brokerage accounts.
While DATs may temporarily surge, they are not Ponzi schemes. They have underlying assets that provide NAV, strategies for managing those assets, and the potential to maximize shareholder value through capital markets.
However, not all DATs are the same. Some DATs will have mNAV consistently above 1, while many will remain below 1, and there will be differentiation.

Differentiating Factors

Here are some key factors that distinguish high-quality DATs from others, not an exhaustive list:

1. Strong underlying assets: The underlying treasury assets should be widely recognized by both institutions and retail. Bitcoin's rise from $11,000 to $115,000 undoubtedly provided significant support for Strategy's growth, and only assets with long-term growth trends can provide lasting value. We believe the best underlying digital assets for DATs are Bitcoin and Ethereum, with Ethereum currently having more upside potential.
2. Capital market expertise: DATs rely on the aforementioned mNAV game. This requires expertise in capital markets, building relationships with sellers and buyers, capital raising and deployment expertise, and innovative financing thinking. This includes risk management strategies, especially when involving debt. DATs with capital market experience may perform better.
3. Yield generation expertise: Bitcoin has no native yield, so the potential for asset accumulation is limited to selling shares at a mNAV premium or leveraging. However, proof-of-stake (PoS) crypto assets like Ethereum have native staking yields, allowing passive asset accumulation even if mNAV is 1 or lower. Additionally, ecosystems like Ethereum have robust, battle-tested, institutional-grade yield generation sources that go beyond staking. Just as capital market expertise is a differentiating factor for off-chain operations, on-chain yield generation expertise (and related risk management strategies) will enable the best operators to achieve higher mNAV.
4. Geographic diversification: While the U.S. has the most robust capital market ecosystem globally, expanding into other jurisdictions may unlock more capital and higher mNAV potential. Metaplanet (a Bitcoin DAT) has established a brand in Japan, with strong retail demand. DATs with multiple geographic focuses may perform better on a mNAV basis.
5. Scale and size: Larger DATs are more likely to gain attention, focus, and access to capital markets than smaller DATs. We see this in the Bitcoin space, where MSTR has the highest sustained mNAV due to its scale and size. It is important to note that enhanced yield generation strategies may break this pattern, as smaller DATs with yield assets like Ethereum may trade at higher mNAV multiples by generating excess returns.
6. Strong marketing engine: DATs are public market tools competing for attention and capital. Having well-known public figures (like Saylor for Bitcoin or Tom Lee for Ethereum) and an efficient marketing engine is crucial for continuously attracting interest in DATs. The goals of DATs are aligned — to accumulate and increase the per-share holdings of crypto assets, but they compete for similar pools of capital, and the best-marketed DATs will command a premium.

Ethereum DATs

Among the differentiating factors mentioned above, the "strong underlying assets" criterion deserves special attention. The simplest way to attract attention, capital flow, and mNAV premiums is for the underlying crypto assets to perform exceptionally well over the long term.
When Strategy began accumulating Bitcoin at $11,000, it rose about 10 times in five years, crossing the chasm of institutional and retail acceptance of "digital gold." This provided tremendous support for Strategy's marketing and capital market engine.
Ethereum is now in the position Bitcoin was five years ago; the time for Ethereum has come.
We believe Ethereum DATs may enjoy the best risk-adjusted upside potential, the strongest capital market tools (both on-chain and off-chain), and ultimately achieve the most enduring long-term mNAV premium among all DATs.
A plethora of DATs with different underlying crypto assets have emerged in the market. Why are Bitcoin and Ethereum the best underlying assets?

• Bitcoin is the first, most tested, and most widely adopted value storage asset. Other assets attempt to replicate it by being faster, cheaper, or more efficient, but Bitcoin's reputation and reliability make it "digital gold."
• Similarly, Ethereum is the first, most tested, and most widely adopted global smart contract platform. Other platforms attempt to replicate Ethereum by being faster or cheaper, but there are significant trade-offs (more centralization, more counterparty risk, more fragile infrastructure). As the long-term wave of institutional and regulatory adoption accelerates, more reputable and reliable platforms will capture the majority of adoption. Ethereum is that network, and ETH is its token.

Ethereum provides the above best DAT differentiating factors:

• Ethereum is the strongest underlying crypto asset, with the highest risk-adjusted upside potential (Ethereum could rise 10 times like Bitcoin).
• Ethereum is one of the most understood assets in capital markets, on par with Bitcoin, which means Ethereum DATs have easier access to capital markets.
• The Ethereum ecosystem has the strongest on-chain yield opportunities in the entire crypto space.
• The Ethereum network is geographically the most diverse and the most well-known globally, laying the foundation for global DAT adoption.
• Ethereum DATs have achieved significant scale and size, growing at a rate far exceeding Strategy (BMNR has accumulated nearly $10 billion in Ethereum, and Ethereum DATs collectively hold over $17 billion in Ethereum, accounting for 3.21% of the supply).
• Ethereum has a strong marketing engine, with figures from Tom Lee to Joe Lubin, Andrew Keys to Etherealize, educating institutional and retail investors about Ethereum's potential.

We believe Ethereum is the best treasury asset for DAT adoption.

Conclusion

What are the benefits of DATs? DATs are a positive-sum game; they provide new audiences with opportunities to access crypto assets, crypto asset management strategies, and on-chain yields. DATs allow crypto assets to have their own "quarterly earnings," providing traditional investors with a familiar way to access underlying assets while educating institutions about cryptocurrencies and showcasing the opportunities of mature financial blockchain ecosystems like Ethereum. DATs will serve as marketing amplifiers, helping the next wave of people enter the crypto space.
What are the risks of DATs? There are operational risks; managing private keys and multi-signature wallets, avoiding hacks from insecure protocols or immature ecosystems, and poor risk management could tarnish some DATs. Leverage is another risk; companies like Strategy drive Bitcoin purchases through debt, and leverage can amplify downside risks.
We are seeing a sudden surge in DATs. Are there too many? Possibly. However, as with all emerging industries and technologies, we are witnessing a wave of excitement and innovation, which is exhilarating.
Ultimately, the endgame may be the consolidation into a few large DATs, becoming benchmark managers of crypto capital. Large operators with mNAV > 1 may continue to leverage capital markets for funding; smaller operators with mNAV of 1 may eventually sell to larger operators.
DATs will exist long-term, just like the crypto industry. DATs will become the managers of crypto capital, similar to asset managers in traditional asset classes.
In the end, traditional finance and blockchain will merge, and DATs are a step towards integrating these two worlds.
Hope DATs are helpful to you!

Article link: https://www.hellobtc.com/kp/du/09/6048.html

Source: https://bowtiedbull.io/p/whats-dat

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