Author: Nancy, PANews
A regulatory announcement has suddenly cooled the recent fervor surrounding cryptocurrency stocks. Recently, Nasdaq has indicated it will strengthen its scrutiny of publicly traded companies that hold cryptocurrencies, putting pressure on the stock price of DAT (Digital Asset Trust). Many companies with premium rates (mNAV) have fallen "underwater" amid this shift in sentiment, and the previously fast-moving financial wheel may slow down as a result.
Nasdaq Takes Action, Pressuring DAT Stock Prices and Premium Rates
On September 4, The Information reported, citing informed sources, that Nasdaq is intensifying its review of listed companies, focusing on those that inflate their stock prices by raising funds to purchase and hoard cryptocurrencies.
As the primary exchange for most cryptocurrency stock trading, Nasdaq believes such behavior could mislead investors, prompting it to increase regulatory oversight. Specific measures have yet to be disclosed, but it is expected that relevant companies will be required to disclose investment scale, strategies, and potential risks, with special scrutiny on companies that frequently trade in crypto assets. If companies fail to comply, the exchange may take measures such as suspending trading or delisting.
In fact, publicly traded companies dominate the DAT space. According to data from consulting firm Architect Partners, at least 154 U.S. listed companies have participated in purchasing cryptocurrencies since January of this year. Meanwhile, data from Bitcointreasuries tracking Bitcoin financial companies shows that there are 61 companies in the U.S., while markets in Canada, the UK, and Japan are far below this level. If Nasdaq takes action, the overall market development of DAT will face significant impact.
With the news of Nasdaq tightening regulations, market confidence is being shaken. The stock prices of DAT companies in the U.S. are generally under pressure; for example, after the market opened today, MSTR fell by 0.81%, SBET dropped by 8.26%, and BTCS decreased by 2.3%.
At the same time, mNAV (market value to net asset value ratio) is also generally declining. Data from Blockworks shows that as of September 4, for instance, MSTR's mNAV fell from a peak of 3.5 times to 1.3 times, SBET dropped from 3.72 times to 0.82 times, and BMNR decreased from 9.45 times to 0.88 times. Notably, only six DAT companies have an mNAV above 1, while the rest continue to show negative premiums, indicating that the previously relied-upon reservoir effect of cryptocurrency asset appreciation is further weakening.
Tighter Regulations May Intensify Market Polarization, Marginal Coins Face Survival Pressure
As regulatory pressure looms, the DAT market landscape may undergo new changes.
On one hand, enhanced regulation will prompt DAT companies to be more transparent and cautious in their cryptocurrency investment strategies, helping to reduce potential risks such as market manipulation and insider trading. According to Fortune, several listed cryptocurrency trust companies have experienced unusual stock price fluctuations. For example, SharpLink's stock price hovered below $3 in April and early May, but after announcing plans to increase its Ethereum reserve assets by $425 million on May 27, its stock price soared to nearly $36. In the three trading days prior to the announcement, SharpLink's stock price had already doubled from $3 to $6, yet the company did not submit relevant documents to the SEC or issue a press release. Similar situations have occurred with companies like Mill City Ventures, MEI Pharma, Kindly MD, Empery Digital, Fundamental Global, and 180 Life Sciences Corp.
On the other hand, the head effect in the DAT market will become more pronounced. Although cryptocurrency trust strategies are becoming increasingly popular, covering various assets such as Bitcoin, Ethereum, Solana, Tron, BNB, Chainlink, SUI, and Ethena, data from Blockworks shows that as of September 4, the total value of cryptocurrencies held by DAT companies has exceeded $69.5 billion, primarily concentrated in Bitcoin and Ethereum, amounting to $68.1 billion. Among these asset types, only Bitcoin has an mNAV of 1.17, while all other assets are below 1, reflecting insufficient investor recognition of other cryptocurrencies.
Moreover, leading companies hold the vast majority of market share. Data from Blockworks shows that as of September 4, the total market capitalization of cryptocurrency trust companies exceeds $108.48 billion, with Bitcoin and Ethereum reserve leaders Strategy and BitMine contributing over 91.4% of the market share. This suggests that in the future market, the advantages of leading companies and mainstream assets may be further strengthened, while marginal assets face survival pressure.
Additionally, tighter regulations may slow the overall expansion of the DAT market. If the financing costs and difficulties for DAT listed companies increase, it will directly affect the investment pace, specifically the scale and speed of hoarding coins. At the same time, the shrinking arbitrage space and market opportunities will also reduce the attractiveness of the DAT model, especially for companies with limited financial strength or those focused on a single small coin.
"The DAT companies that the market is preparing for must first completely acquire the shell stocks of U.S. stocks (100% acquisition) before they can announce the transformation to the DAT micro-strategy model for the first time, which requires holding a shareholder meeting for a vote. This effectively increases the operational costs and cycles for new DAT trust companies; previously transformed listed companies must also hold a shareholder meeting for a vote before issuing new shares. Issuing bonds or convertible bonds does not fall under the category of issuing new shares and should not be subject to this regulation," crypto KOL @qinbafrank analyzed, pointing out that Nasdaq's official move is to cool down the DAT model, increase the difficulty of shell companies transforming, and add processes for already transformed companies to issue new shares. In the short term, this should pour cold water on the market, making it increasingly difficult for many altcoin DAT companies. Furthermore, those that have already transformed into DAT trusts must win shareholder approval and majority votes without resorting to capital operation tricks (such as directly exchanging tokens for shares or purchasing low-priced discounted tokens).
Liquidity Innovation or Financial Bubble? The Sustainability of DAT is Controversial
The escalating trend of DAT has elicited polarized reactions in the market.
Supporters view it as the best bridge for transferring crypto assets on-chain and off-chain, believing this new model may rewrite the liquidity landscape of the crypto financial market. For instance, Xiao Feng, Chairman and CEO of HashKey Group, believes that DAT may be the best way for crypto assets to transition from on-chain to off-chain, detailing four core advantages of DAT over ETFs: better liquidity. ETF subscriptions and redemptions take considerable time, while DAT facilitates more convenient and efficient asset transfers for investors; higher price elasticity. DAT's market value is highly volatile and possesses risk isolation attributes, providing institutions with more arbitrage tools; more reasonable leverage design. DAT companies offer leveraged financing structures, which can provide investors with higher premiums compared to the price growth of cryptocurrencies themselves; built-in downside protection mechanism. When the stock price drops below the net asset value of the assets held by the company, investors get the opportunity to buy Bitcoin or ETFs at a discount. Such situations where stock prices fall below asset values will quickly be smoothed out by the market.
Moreover, several crypto VCs are increasing their investment in DAT. For example, Pantera Capital has disclosed that it has invested over $300 million in DAT companies; DWF Labs Executive Partner Andrei Grachev recently stated that he is willing to provide financing of 10 to 20% for projects aimed at establishing token trusts for U.S. listed companies.
However, many voices have raised concerns about the sustainability of DAT. According to Adam Reeds, co-founder and CEO of Ledn, digital asset trust companies that are keen on hoarding coins are facing a turning point. Bitcoin trust companies were once a revolutionary innovation in the industry, but now such excess returns are difficult to replicate. What is truly fading is the ability to create unique value propositions. Most DAT company CEOs claim their sole goal is to increase the per-share cryptocurrency holdings, but it remains unclear whether they have unique management teams or exceptional capital operation capabilities.
Similarly, James Check, Chief Analyst at Glassnode, believes that the Bitcoin trust strategy is much shorter than most people expect, and for many newcomers, it may already be over. This is not a "measuring contest"; the key lies in the long-term sustainability of a company's products and strategies in the Bitcoin market. Additionally, due to investor preference for early adopters, newly established Bitcoin trust companies are facing a tough battle.
Further skepticism arises from judgments about the financial nature of DAT. Nate Geraci, President of The ETF Store, stated that if investors truly believe in Bitcoin and Ethereum, they can directly buy spot or ETFs instead of relying on DAT as a derivative alternative. He emphasized that the prosperity of such companies largely depends on regulatory arbitrage, and as regulatory barriers gradually break down, the market demand for them will naturally decline. Analysts at Franklin Templeton warned that if DAT's market value falls below its net asset value, new stock issuances will create a dilution effect, hindering capital formation. If combined with a decline in cryptocurrency prices, companies may be forced to sell assets to maintain stock prices, further suppressing the market and confidence, thus creating a self-reinforcing downward spiral. Former Goldman Sachs analyst Josip Rupena even compared DAT to CDOs (Collateralized Debt Obligations) during the 2007-2008 financial crisis, pointing out that although cryptocurrency trust companies superficially hold non-counterparty risk assets, they actually introduce multiple risks, including management capability, cybersecurity, and insufficient capital generation, which could amplify into systemic risks.
In summary, the future of DAT hinges on whether it can break free from a reliance on regulatory arbitrage and leverage amplification logic, achieve sustainable development by maintaining a market value above net assets, continuously create value-added transactions, and establish effective risk management frameworks.
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