DATs: A Double-Edged Sword for Crypto Investors
Digital asset treasury companies, also known as DATs, are public equities whose main job is to accumulate cryptocurrency on their balance sheet. One of the most notable examples is Strategy (MSTR), formerly known as MicroStrategy, which has written the playbook for this strategy.
They raise capital, buy Bitcoin (BTC-USD), and hold it on their balance sheet. However, DATs are not a magic solution for investors seeking crypto exposure. They come with additional risks such as equity risk, issuance risk, and management risk.
The historic pattern for DATs is that their multiple tends to mean-revert: punished in bear markets and rewarded in bull markets. This means that when the market is down, DATs tend to fall more sharply than Bitcoin, but when the market is up, they tend to rise more quickly.