In today’s “Crypto for Advisors” newsletter, Aaron Brogan from Brogan Law breaks down the history and business model of digital asset treasuries.
Then, in “Ask an Expert”, DJ Windle from Windle Wealth answers questions that advisors need to know about crypto treasury companies.
Digital Asset Treasuries: Separating Hype from Value for Advisors
Digital asset treasury (DAT) companies offer public crypto exposure, but how much hype are you buying?
The digital asset treasury (DAT) company is a new invention with a long history. They are public companies pursuing an explicit priority of purchasing digital assets. Back in 1989, Michael Saylor founded MicroStrategy (now Strategy) as a software business. It achieved some success and went public in 1998, only to spectacularly implode in 2000, lose more than 99% of its market cap, and catch an SEC investigation.
Improbably, though, Strategy did not go bankrupt in 2000, and continues to offer obscure software and services today. The magic happened elsewhere, though. In 2020, the firm began purchasing bitcoin, and it hasn’t stopped.
At first, its approach appeared to be rabid evangelism. Saylor would buy bitcoin, go on TV and convince others to buy bitcoin, and that would drive the company’s investment up. But over time, another phenomenon appeared. As Strategy bought more and more bitcoin, and the price of bitcoin climbed ever higher, Strategy increasingly became a box of bitcoins with a vestigial software company stapled onto it. At this point, its share price and market cap should have converged to the price of bitcoin, but it didn’t. It traded at a premium. When this happened, promoters stirred from their hoards like Smaug, and the DAT was born.
This multiple of a DATs net asset value (NAV) and its market cap, known as its multiple of NAV (mNAV), creates a special kind of power. If you can buy an asset for $1, and increase your market cap by $2, then you should do nothing else. You can sell equity, and indeed raise debt, and put it to immediate direct productive use accreting shareholder value. As long as this relationship holds, it is, in essence, a money printer.
And so as Strategy ran this playbook over time, others took notice. They started to get the idea that maybe they could follow it, and make their own DAT. Some used BTC, like Mara Holdings, Inc., but over time others tried it with other assets like Ether , held by Bitmine Immersion Technologies, Inc., and Solana , held by Forward Industries, Inc., as well.
Source: Galaxy Research
For the promoters of these projects, the value proposition is clear. Asymmetric increases in equity value, coupled with public trading, lead to quick profits. BTC has always been highly liquid, but for virtually all other digital assets, creating a public sink to purchase tokens presents the dazzling potential to increase asset values and provide exit liquidity in a single stroke. This is a major reason that the meta has gained so much traction recently. It is good for bagholders.
But what about purchasers? Well, getting access to a DAT stock before its mNAV grows is good, as the company implements its strategy and, hopefully, gains value, equity holders may see gains. But for an ordinary buyer on public markets, after a positive mNAV is established, the value proposition is speculative. You are buying a premium on the underlying asset, and that premium could easily fade.
Historically, access to Strategy was valuable to institutional advisors who were hesitant or legally unable to purchase bitcoin directly for their clients. They could hold Strategy instead. But as old taboos fade, and regulatory disapprobation with it, this proposition may lose luster. At the same time, exchange-traded products (ETPs) that skip the step of wrapping a treasury in an operating company have been approved recently, further diluting DAT’s advantage.
There is also the regulatory question. Strategy is not a ‘40 Act Fund because BTC is not a security, but it is not obvious that the same reasoning would apply to DATs holding other assets. A future administration unfriendly to the industry could test the operating company exemption on which they rely. To the extent that DATs use leverage to acquire assets, future market instability could lead to liquidations, increasing risk. Premiums, too, may be collapsing even now.
Chart: Strategy performance vs. bitcoin (Source: strategtracker.com)
For advisors, understanding these different risk vectors is critical to advising clients on a DAT buying strategy. Regulatory risk is unlikely to be significant in the current environment, but premium collapse could be, so understanding a DAT’s mNAV at purchase is critical to evaluating its risk profile. Leverage, too, can increase risk profile. Finally, DATs may change strategy more readily than a comparable ETP, and so monitoring developments in management is another important factor to consider.
– Aaron Brogan, founder and managing attorney, Brogan Law
Ask an Expert
Q: What should advisors understand before clients start asking about digital asset treasury companies?
A: Advisors don’t need to master every nuance of on-chain finance, but they do need to grasp what makes a digital asset treasury (DAT) company behave differently from a traditional stock. These companies hold large amounts of crypto on their balance sheets, and their share prices often move with those assets rather than their business fundamentals.
When clients bring them up, they’re really asking: “Is this a safe way to own crypto in my brokerage account?” The best preparation is to understand that DATs function as leveraged proxies for digital assets. They can trade far above (or below) the value of their holdings depending on market sentiment, leverage, and liquidity. Being able to explain that dynamic clearly separates education from hype.
Q: How can advisors evaluate whether a DAT makes sense for a portfolio?
A: Start with what drives the stock. A DAT’s share price reflects not just the value of its crypto treasury but also investor sentiment, leverage, and liquidity. Advisors should review three things:
- Treasury Mix: What assets are held and how transparent are they?
- Leverage: Has the company borrowed to buy more crypto? If so, volatility is magnified.
- Premium/Discount: Compare the company’s market cap to its actual asset value. This gap is where most investors misjudge risk.
Advisors can then reframe client enthusiasm around fundamentals. Is the goal diversified exposure or speculation on a premium? That distinction determines whether a DAT belongs anywhere near a client’s portfolio.
Q: What should advisors be ready to explain when clients compare DATs to spot ETFs?
A: This will be the most common question. The answer is that spot ETFs hold the digital asset directly, trade close to net asset value, and operate under clear regulation. DATs, on the other hand, are companies using corporate balance sheets to hold those same assets and sometimes using debt to do it.
That means the potential upside can look exciting, but the risk profile is closer to a leveraged stock than an ETF. Advisors should prepare to discuss taxation, concentration risk, and how DATs might react differently from the underlying crypto. Helping clients see that difference turns a speculative headline into a teachable moment about structure, liquidity, and risk tolerance.
– DJ Windle, founder and portfolio manager, Windle Wealth
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