Simply put
- Hogan mentioned that digital asset treasury (DAT) companies generally deal with structural challenges that often keep their market prices below their actual asset values.
- He suggests that only a few uncertain strategies might manage to enhance crypto value per share over time.
- Others are now pointing out that mechanisms like staking and spot ETFs are overshadowing the DAT framework.
Matt Hogan, the Chief Investment Officer at Bitwise, noted that most DAT companies are unlikely to maintain a premium for their crypto assets. He believes the costs of operating, challenges with liquidity, and execution risks overshadow the few dependable ways to increase crypto value per share.
Hogan offered a perspective that sees DAT as a limited entity. He talked about the predictable factors that tend to push its market value below the worth of its holdings, contrasting those with the scarce and often uncertain strategies available to boost cryptocurrency values per share.
“Most companies will trade at a discount, and only a few exceptional companies will trade at a premium,” he explained on Twitter, elaborating on why the standards for DAT are particularly high.
Most downward pressure on DAT ratings, he claimed, stems from “illiquidity, costs, and risks,” which he described as significant challenges in the sector.
Hogan analyzed the discount component, starting with “illiquidity.” He posed a question: why would someone pay now for the complete amount of Bitcoin they’d receive in a year?
For Hogan, there’s an implicit discount tied to the difference between immediate ownership and postponed delivery, which grows with time and complications.
He also mentioned that “expenses” and “risk” add to the downward pressure. “Every dollar spent on operating costs and executive salaries is out of your pocket,” he remarked, suggesting that investors must also consider the chance a company may fail.
These elements combine to create a fundamental discount that investors apply to DAT before contemplating any possible offsets.
Hogan identified “four primary methods” that DAT is exploring to raise its crypto value per share. He noted that only a limited number of strategies can effectively counteract inherent structural challenges.
These methods include issuing bonds, lending tokens, utilizing options, and acquiring assets at reduced prices. However, he cautioned that these tactics only succeed under specific conditions and without heightening risk.
He further noted that “costs and risks are likely to escalate over time.” This implies that crypto gains per share will need to be consistently achieved across different cycles, while the pressure on perpetual DATs will only grow.
Emotional changes
Hogan’s insights arise as overall sentiment regarding DATs evolves, with analysts suggesting that regulated ETFs might provide a cleaner and less volatile route to market exposure.
Previously reported, Nate Geraci, co-founder of ETF Institute, referred to ETF staking as “DAT killers,” claiming it marks the end of prosperity from government debt due to regulatory loopholes.
In response, Eric Balchunas, a senior ETF analyst, claimed that ETFs serve a similar function as DATs but offer better tracking of asset performance.
Balchunas mentioned that some financial entities can only invest in stocks or bonds, leaving organizations like MicroStrategy with additional opportunities. However, he pointed out that this particular audience is “not large enough for many institutions to thrive.”
Hogan did not reply immediately when asked for further comments.
