Crypto for Advisors: Digital Asset Treasuries

Digital asset treasury (DAT) companies represent a new business model with a complex history linked to previous ventures like MicroStrategy. Initially a software company, MicroStrategy transformed into a significant holder of Bitcoin in 2020. This evolution inspired the creation of other DATs, which aim to provide public exposure to cryptocurrencies, capitalizing on perceived asset value and market premiums. Advisors must understand the risks inherent in DAT investments, such as premiums, leverage, and regulatory concerns. DATs can trade at significant premiums to net asset value (NAV), a factor that can complicate investments for clients. Moreover, the market behavior of these companies may differ markedly from traditional stocks, often moving in tandem with crypto asset valuations. Advisors should evaluate the underlying assets, leverage used by the company, and market sentiment when assessing DATs for client portfolios. Understanding these dynamics is crucial for distinguishing between speculative investments and those with solid fundamentals.

Source 🔗