Crypto for Advisors: Digital Asset Treasuries

Digital asset treasury (DAT) companies provide public crypto exposure, but their true value is debated. This article discusses the evolution of DATs, starting with MicroStrategy's initial foray into bitcoin investments, which transformed its business model. The concept is that DATs can leverage their net asset value (NAV) to generate shareholder value by increasing market cap without necessarily enhancing underlying business fundamentals. Advisors must be wary of purchasing DAT stocks, as they often trade at a premium over their actual holdings, leading to speculative risks. Key considerations include treasury mix, leverage, and the premium/discount of market cap relative to asset value. Advisors are advised to prepare clients for comparisons between DATs and spot ETFs, highlighting the differences in regulatory frameworks and risk profiles. A DAT operates more like a leveraged stock compared to an ETF, which directly holds assets and trades at NAV.

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