Crypto for Advisors: Digital Asset Treasuries

Digital Asset Treasuries (DAT) companies provide public access to crypto assets, blending traditional stock trading with digital asset investments. Notably, MicroStrategy's pivot to Bitcoin in 2020 marks the emergence of DATs. These firms can trade at a premium due to their market cap exceeding the net asset value, essentially transforming them into money printers by leveraging their equity. Advisors must assess specific risks, such as how a DAT's market cap relates to its asset value, the leverage used, and the transparency of asset holdings. With the rise of exchange-traded products (ETPs), the appeal of DATs might diminish as clients seek directly held assets with lower risk profiles. Understanding these dynamics is essential for advisors to effectively guide their clients amidst the speculative nature of DATs, especially as market sentiment significantly influences their share prices relative to business fundamentals.

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