Original author: @Matt_Hougan
Translated by: Peggy, BlockBeats

Editor's note: Digital Asset Treasury (DAT) was once seen as a "moat" in the crypto market, but as Bitcoin fell back to the $80,000 range, the flywheel effect has stalled, and the market has entered a period of adjustment.

Recently, there has been frequent debate in the market regarding the DAT model. Supporters argue that DAT serves as a bridge connecting crypto and TradFi, promoting ecosystem development, with leading companies like MSTR maintaining close to 1.03 mNAV, proving that quality players possess resilience and are expected to achieve premiums through strategies such as debt, lending, and derivatives.

Opponents warn that DAT is essentially leveraged speculation, easily falling into a "death spiral" during bear markets, with the VC model exacerbating selling pressure, and altcoin DAT posing concentrated risks. Regulatory uncertainties (MSCI exclusion, Hong Kong Stock Exchange rejecting transformation plans) further amplify discounts, leading to increased market fragmentation, with long-tail DAT averaging a decline of over 70%.

On November 21, crypto analyst Taiki and Multicoin Capital co-founder Kyle Samani engaged in a direct confrontation on the X platform regarding "whether DAT will sell spot assets to buy back shares."

Taiki Maeda's highly interactive post pointedly stated: "DAT turns decentralized pure assets into a VC bundling scam, creating selling pressure." This viewpoint reinforced the narrative of "death spiral" and "centralization risk," particularly impacting altcoin DAT more severely.

Kyle emphasized that there is almost no evidence that DAT would sell spot assets to buy back shares, arguing that such behavior is not a systemic issue but rather individual cases or misunderstandings, and hinted that DAT focuses more on long-term value growth. Taiki countered that when mNAV is below 1, DAT is easily forced to sell assets to buy back shares, forming a "death spiral," and questioned Kyle using the current mNAV1 of $FWDI as an example, pointing out precedents (such as ETHZILLA and small DAT) that sold treasury assets for buybacks during bear markets.

This sharp debate, combined with the community's agreement that DAT is "meaningless," further amplified market concerns about the structural risks of DAT.

This article, based on the core valuation logic of DAT (mNAV, discount, and premium factors), combined with the latest debate, explores the sustainability of the DAT model, regulatory challenges, and the trend of the 80/20 split, helping you to discern which companies may trade at a premium and which are destined to trade at a discount.

The following is the original text:

I see a lot of bad analysis about DAT (Digital Asset Treasury). In particular, many people have very unreliable views on whether they should trade above, below, or at the value of their held assets (the so-called "mNAV").

Here are my thoughts.

When evaluating a DAT, the first question to ask yourself is: If this company had a fixed lifecycle, how much would it be worth?

If you consider a very short time frame, the value of this approach becomes obvious. For example: Suppose you have a Bitcoin DAT that announces it will close this afternoon and distribute Bitcoin to investors. Its trading price would then equal the value of its Bitcoin (i.e., mNAV of 1.0).

Now extend the time frame. What if it announces it will close in a year? At this point, you must consider all the reasons that would cause the DAT's trading price to be above or below its Bitcoin value. Let's review these factors.

Three Reasons for Discount Trading

The three main reasons DAT trades at a discount are: lack of liquidity, operating expenses, and risk.

1. Lack of liquidity: You wouldn't want to pay full price today for Bitcoin that you won't receive until a year later. But you would be willing to pay some discounted price. Would you ask for a 5% discount? Or 10%? If it were me, I would definitely choose 10%. This would lower the value of our DAT.

2. Operating expenses: Every dollar of operating expenses or executive compensation ultimately comes from your pocket. Suppose our 12-month DAT holds Bitcoin worth $100 per share, but pays executives an amount equivalent to $10 per share annually. Then you would certainly demand a 10% discount on the net asset value (NAV).

3. Risk: Companies can always make mistakes in certain aspects. You also need to factor this risk into the price.

Four Ways for Premium Trading

Now let's look at why DAT might trade at a premium. In the U.S., there is only one reason: if it can increase the number of crypto assets per share.

I have seen four main ways DAT attempts to do this.

1. Issuing debt: If you issue debt in dollars and purchase crypto assets, and the crypto assets appreciate relative to the dollar, you can repay the debt and increase the number of crypto assets per share. This is often the strategy to increase its per-share BTC. (If the price of Bitcoin falls, the opposite is true.)

2. Lending crypto assets: If you lend out crypto assets and receive interest payments, you can increase the number of crypto assets per share.

3. Using derivatives: If you hold crypto assets and engage in actions like selling call options, you can earn income and accumulate more assets this way. Of course, this also means you might give up upside potential.

4. Acquiring crypto assets at a discount: DAT may acquire crypto assets at a discount through various means, such as:

Purchasing locked assets from foundations to sell specific assets without disturbing the market;

Acquiring another DAT that is trading at a discount;

Buying back its own shares if its stock is trading at a discount;

Acquiring a cash-generating business and using that cash flow to purchase crypto assets.

A challenge faced by a DAT is that the reasons leading it to trade at a discount are mostly certain, while the reasons leading it to trade at a premium are mostly uncertain.

Because of this, DAT faces a high threshold: most will trade at a discount, and only a few outstanding companies will trade at a premium.

Returning to our example: If you have a Bitcoin DAT that will liquidate in 12 months, you can do the following:

(1) Calculate its operating expenses;

(2) Add in the risk discount;

(3) Offset these discounts with your expectations of its ability to increase the number of Bitcoin per share.

That is its fair value!

You might think: Well, Matt, but DAT does not have a fixed lifecycle. They will continue indefinitely!

This indeed complicates the issue. But in reality, it means everything will be magnified. Expenses and risks will compound over time, so they must be closely monitored. Similarly, DATs that can continuously increase the number of crypto assets per share may be very valuable.

When I review the ways DAT increases the number of crypto assets per share, I notice a significant characteristic: each method benefits from scale.

Larger DATs find it easier to issue debt than smaller DATs; they have more crypto assets available for lending; they can access more liquid options markets; they also have better opportunities in mergers and acquisitions and other discount trades.

Over the past six months, DAT prices have fluctuated almost in sync. But in the future, I believe there will be more differentiation. Some companies will perform well and trade at a premium, while more companies will perform poorly and trade at a discount. This model is a way to help you judge which type of company belongs to which category.

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