Crypto for Advisors: Digital Asset Treasuries

Digital asset treasury (DAT) companies offer a new way for investors to gain exposure to cryptocurrencies by holding significant amounts of digital assets on their balance sheets. The evolution of DATs traces back to firms like MicroStrategy, which absorbed Bitcoin and became more of a crypto play than a traditional software company. While these companies can provide an avenue for accessing crypto indirectly, they often trade at a premium to their underlying asset values, leading to speculation among investors. Advisors must be cautious, understanding the dynamics of factors such as asset mix, leverage, and the premium/discount of the market cap compared to net asset value. Regulatory considerations also emerge, as the classification of these firms can differ depending on the assets they hold. As traditional barriers fade, the appeal of DATs may diminish in favor of more straightforward digital asset investments, such as exchange-traded products. Advisors should prepare to address client inquiries about the risks and benefits of DATs compared to direct crypto investments and spot ETFs, clarifying the complexities involved in their structure and market behavior.

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