<div id="readability-page-1">Acolytes of Michael Saylor’s Strategy have had a great run and are bracing for what comes next  Over coffee in Hong Kong last week, a crypto hedge fund manager asked if I could introduce any “quality companies” to him. Given that tastes differ, I asked what a quality company meant to him.  “We’re looking for companies with a tiny market capitalization, a business that is failing, management that is coachable, and a board of directors open to new ideas,” he replied. “Oh, and they need to be current with their SEC filings so we can raise a lot of capital fast.”  SYMBOL - 23 April 2024, Baden-Württemberg, Rottweil: The logos of the cryptocurrencies Bitcoin (BTC), Ethereum (ETH), the stablecoin Tether (USDT), Binance Coin (BNB) and Solana (SOL) can be seen on the trading platform CoinMarcetCap. (Image with longer exposure time). Photo: Silas Stein/dpa (Photo by Silas Stein/picture alliance via Getty Images) dpa/picture alliance via Getty Images Welcome to the world of Digital Asset Trusts, or DATs, in which the cast-offs of the public markets find a new life by raising boatloads of capital from hedge funds, which they then plow into purchasing a trove of Bitcoin, Ethereum, Solana, or other lesser tokens. Up until a few minutes ago, the announcement of a “treasury strategy” was almost guaranteed to send a microcap stock soaring — making this trade one of the biggest fee generators for Wall Street’s fintech investment bankers in 2025.  Today, 192 companies hold Bitcoin on their balance sheets according to bitcointreasuries.net , up from just 70 at the end of 2024. For many, buying and holding cryptocurrency is now their primary business, as they seek to duplicate the spectacular returns of Michael Saylor’s Strategy ( NASDAQ: MSTR ), which has soared about 3,000% since he initiated accumulating Bitcoin in August of 2020.  When Saylor took the stage at an investment conference in NYC earlier this month, he preached the gospel of Bitcoin salvation to a room of money managers with the fervor of a tent meeting revival. Every mediocre public company, he intoned, had the potential to become a “$1 billion, $10 billion, or $100 billion amplifier” of the Bitcoin strategy he had invented. “Each one is a superspreader of the Bitcoin virus,” Saylor thundered, noting that Strategy now owned 3% of all the Bitcoin in the universe and was buying more that same day.  MORE FOR YOU The success of Digital Asset Treasuries is based on a form of financial alchemy, in which public companies have been able to sell stock to investors at a multiple above the value of the cryptocurrency held on their balance sheet. As long as this premium to book value is sustained, the companies are continuously able to issue new stock and squirrel away more Bitcoin or other tokens in their treasury.  Why investors should be willing to pay this premium, rather than having exposure directly to Bitcoin by buying the coins or using an ETF, is somewhat less clear.  According to Akshat Vaidya , Managing Partner at Maelstrom , the DAT format enables many asset managers to get exposure to crypto assets that their investing mandates might not otherwise permit.  Because they are effectively single-crypto asset hedge funds wrapped in public companies, DATs “integrate well with the rest of these investors’ portfolios, making risk management and portfolio-wide margining much easier,” he explained. “Fund managers are now able to justify DAT investments to their investment committees that earlier would've simply said ‘no’ to dealing with the complexities of interacting with blockchains in order to put magic internet money on their books.”  As investment bankers have started to figure out the appetite for new treasury strategy names, they’ve become very enterprising at connecting the founders, sponsors, and/or foundations behind digital currencies, often offering to package them with stagnating public companies. “I personally see five or ten of these deals a week, and it’s the same five bankers behind each one,” Akshat said. “These don’t come about organically. One-time fee generating bankers have a massive incentive to orchestrate these and they are certainly acting on it.”  As the Bitcoin strategy trade became more crowded, enterprising public companies have come to embrace more exotic flavors of tokens.  Brian Rudick serves as Chief Strategy Officer at Upexi, Inc. ( NASDAQ: UPXI ), a treasury strategy company focused on Solana tokens. He believes smart contract tokens such as Solana provide for more active opportunities for management to generate value for shareholders. Such techniques include generating yield by “ staking ” the tokens to validators that underpin the Solana ecosystem and buying locked tokens at a discount that then appreciate in value when they come unlocked.  Rudick believes that the treasury strategy is “probably only going to work over the long term with 4 to 5 underlying assets.” He noted that “95% of ‘altcoins’ are down 95% over a five-year period. So, you have to make sure that not only the asset you’re underpinned by will perform well, but that it will actually be around in five years.”  This photo illustration shows a representation of cryptocracy coins with the $Trump meme coin (collection coin) in Brussels, Belgium, on March 3, 2025. (Photo by Jonathan Raa/NurPhoto via Getty Images) NurPhoto via Getty Images That hasn’t stopped new entrants from trying their luck with various meme coins.  Alt5 Sigma Corp . ( NASDAQ: ALTS ), whose board included Eric Trump, raised $1.5 billion in August to invest in the Trump family’s World Liberty Financial (WLFI) token with World Liberty as the lead investor , in a uniquely circular deal. Dogecoin, the meme coin initially created as a joke in 2013 and beloved by Elon Musk, is the core holding of three DATS. These include the former ozone cleaning solutions company CleanCore Solutions ( NASDAQ: ZONE ), former cannabis company Spirit Blockchain Capital , and former Chinese pork producer Bit Origin ( NASDAQ: BTOG ).  “Our hope is that a few clear market leaders will emerge across legitimate digital asset classes, and we’ve already seen that some community-driven tokens can achieve significant adoption and even make their way into public markets,” said Vik Mittal , managing member at Meteora Capital . “At the same time, it’s reasonable to assume that history may repeat itself for less durable projects, so discernment will be key in separating long-term winners from the rest.”  Since the market peak earlier this summer, the shares of many treasury strategy companies have been sliding , causing the premium of their equity value to the underlying digital assets to compress. The mNAV, or market to net asset value, of market leader Strategy has shrunk from over 4X to 1.4X, while several other DATs are now trading at a discount to the bitcoin they own.  Famed short seller Jim Chanos has engaged in a very public tussle with Michael Saylor, asserting that no premium to book value is justifiable and reportedly backing this up by shorting Strategy’s stock while buying underlying Bitcoin. Saylor has said that Chanos fundamentally misunderstands Strategy’s business model, while Chanos accuses Saylor of spouting “financial gibberish” while piling on leverage through increasingly exotic debt and preferred securities.  When mNAV becomes compressed, DATs can no longer sell equity to purchase more tokens, and the flywheel effect of increasing coin-per-share can go into reverse. Companies that have taken on significant leverage might be forced to start selling the underlying assets to pay their interest on their debt, adding new selling pressure.  Some of the hedge funds that have been among the most active investors in the space are already gaming out how the party plays out if and when the music stops.  Mittal believes that so long as treasury strategy companies are prudent in the amount of leverage they use, they should be able to ride out any storm.  “More strategic management teams, if they’re trading at a discount to mNAV and they’re truly fiduciaries for their shareholders, they’ll sell the underlying asset and buy back stock to close out that discount,” he said. “We firmly believe there will be market leaders in the major altcoins that will do well…if you’re a subscale operator, then you ultimately will get consolidated.”  Vaidya, who has invested through several cycles in the crypto space, is sanguine that even significant distress will bring fresh opportunities.  “Even a modest correction, let’s say 30 to 40% over a few days, in crypto prices would probably crush the majority of these names. The DATs would get margin called at the same time that overleveraged DAT investors would get margin called themselves as their own crypto portfolios tank. And suddenly everyone would be rushing to sell the underlying at the same time,” he said. “After this happens and we’re firmly back in a bear market, we will sift through the rubble and identify who the winners will be going forward. There will be a flight to quality, and we will double down like crazy at the depths of the bear market into the best of these names.”  For the crypto true believers, even the nastiest market crash comes with the territory when you’re building a new, decentralized world financial order— you simply sweep up the trash, reposition your portfolio, and get ready to party again.</div>

MSTR

<p>The rise of Digital Asset Trusts (DATs) is transforming public companies into crypto investment vehicles, allowing them to raise capital by holding cryptocurrencies like Bitcoin and Ethereum. Companies with small market caps and struggling businesses are particularly appealing to hedge funds seeking to capitalize on this trend. Michael Saylor's strategy has inspired many, with 192 companies now holding Bitcoin, up from 70 in 2024. Investment bankers are actively facilitating these treasury strategies, creating opportunities for public companies to integrate crypto assets into their portfolios, despite the complexities involved.</p>

Past Midnight, The Crypto Treasury Party Is Just Getting Started