DATs Might Be Better Wrappers Than Spot ETFs For Some Digital Assets

Summary During August and September 2025, Digital Asset Treasuries dominated the vehicles through which digital assets have gone mainstream on Wall ￰0￱ years after MicroStrategy’s first bitcoin purchase - during which time no companies dared follow its lead - hundreds of DATs have ￰1￱ investors compare crypto assets - especially L1 tokens - to equities, commodities, or currencies, even though they are more different than ￰2￱ Lorenzo Valente Introduction During August and September 2025, Digital Asset Treasuries (DATs) dominated the vehicles through which digital assets have gone mainstream on Wall ￰3￱ must have been a surprising turn of events to those in the community who assumed that ETFs would continue to play the role that DATs have started to ￰4￱ happened?

Several years ago, MicroStrategy pioneered the bitcoin DAT model, but investors did not understand how to apply it to other digital ￰5￱ paper describes why the DAT phenomenon has been controversial in four sections: DATs description The DAT landscape The rationale for a DAT mNAV premium Risks associated with DATs DATs Description A Digital Asset Treasury ((DAT)) is a company that holds cryptocurrencies, such as bitcoin, ether, or solana (SOL-USD) directly on its balance sheet, to which investors can gain exposure by buying its ￰6￱ SEC-regulated 1 spot Bitcoin (BTC-USD) or Ethereum (ETH-USD) ETFs that hold crypto passively and issue shares backed one-for-one with holdings, DATs are companies - operating businesses that can use leverage, corporate strategy, or financing to manage their ￰7￱ ETFs provide the regulated exposure germane to public investment instruments, DATs introduce corporate risk and potential upside or downside beyond the underlying ￰8￱ before the phrase “digital asset treasury” evolved, MicroStrategy developed the first “DAT” for ￰9￱ Michael Saylor’s leadership, the company deemphasized its enterprise software business to accumulate as much bitcoin as ￰10￱ of September 15, 2025, MicroStrategy (Renamed “Strategy” (MSTR)) had acquired more than 632,000 BTC for $46.5 billion - an average of $73,527 per coin. 2 Today, the company controls more than 3% of the scheduled 21 million bitcoin supply. 3 MicroStrategy accumulated its bitcoin position with various financing ￰11￱ it began by issuing convertible senior notes, followed by senior secured notes at a 6.125% yield, 4 the real breakthrough was an at-the-market ((ATM)) equity ￰12￱ its stock, MSTR, was trading at a substantial premium to book value, Saylor issued new shares, diluting existing holders but using the proceeds to buy more bitcoin and increase its bitcoin per ￰13￱ effect, its shareholders supplied the capital to leverage MicroStrategy’s exposure to ￰14￱ approach has caused quite a bit of ￰15￱ denigrate DATs by suggesting, “They’re selling 50 cents for a dollar.” 5 What does that mean?

If a DAT were to trade at twice its market net asset value (mNAV), investors would be paying two dollars in equity for every dollar’s worth of bitcoin on the balance ￰16￱ other words, the premium seems irrational and ￰17￱ far, MicroStrategy’s stock has defied that analysis and rewarded shareholders ￰18￱ for a brief dip into discount territory during the bear market between March 2022 and January 2024, MSTR has been priced at a significant premium to ￰19￱ importantly, Saylor has weaponized that premium strategically by issuing shares well above book value and increasing MicroStrategy’s bitcoin holdings ￰20￱ a result, not only has MSTR compounded shareholder exposure to bitcoin, but it also has outperformed a simple buy-and-hold bitcoin strategy since its first bitcoin purchase in August 2020 significantly. 6 The DAT Landscape Five years after MicroStrategy’s first bitcoin purchase - during which time no companies dared follow its lead - hundreds of DATs have ￰21￱ new vehicles are accumulating ETH, SOL, HYPE, ADA, ENA, BNB, XRP, TRON, DOGE, SUI, AVAX, and many other digital ￰22￱ the market is beginning to rally around the largest-cap assets, as a handful of well-capitalized DATs are competing to accumulate ETH and SOL.

Combined, ETH-focused DATs have acquired 3.74% of the ether supply, 7 and Solana DATs 2.31% of the SOL supply, 8 as shown below.). While approaching DATs cautiously and monitoring their rapid evolution closely, we can understand the reasons that some DATs trade at a an mNAV premium, among them the following: DATs’ Revenue / Staking Yield DATs’ Speed of accumulation / Velocity DATs’ Liquidity and Inexpensive Capital DATs’ Optionality Revenue / Staking Yield Smart contract Layer 1 blockchain protocols (L1s) 10 - Ethereum, in particular - offer native yields through staking, which rewards participants for securing the ￰23￱ the digital asset ecosystem, that yield is effectively the risk-free rate, as it is generated within the protocol and does not involve counterparty ￰24￱ contrast, spot ETFs in the US do not allow staking for yield on the underlying ￰25￱ of Ethereum’s design, even if regulators were to change their position, ETFs probably would be able to stake a limited percentage of their holdings - perhaps less than 50% - as the network enforces “churn limits” that restrict how many validators can enter or exit during each epoch. 11 Essential for security, the limits prevent malicious actors from spinning up or shutting down large numbers of validators at once, ensuring that any changes do not overwhelm consensus or state ￰26￱ a result, staking or unstaking ETH can take up to two ￰27￱ ETFs could use liquid staking protocols 12 and tokens to circumvent the limits, compliance, liquidity, and centralization risks are likely to prevent ETFs from staking significant portions of their ￰28￱ contrast, DATs can benefit from significant ￰29￱ DATs are extremely lean organizations, often run by very small teams that generate outsized ￰30￱ a $10 billion market cap, if all ETH is staked, Bitmine Immersion, for example, generates ~$300 million of free cash flow annually, 13 capital that can be redeployed into mergers and acquisitions (M&A), token purchases, on-chain opportunities, or shareholder ￰31￱ Of Accumulation / Velocity Justifying DATs premium-to-book value are the speed of asset accumulation and the growth in cryptoassets per ￰32￱ can grow cryptoassets per share more quickly than the price appreciation of the underlying asset and, by extension, accelerate revenue growth by staking ￰33￱ ￰34￱ July 13, the company held 163,142 ETH across roughly 56 million fully diluted shares. 14 At $2,914 per ETH, ETH per share was 0.0029, or $8.45.

Just 31 days later, our estimates suggest that Bitmine’s holdings and shares had expanded to 1.15 million ETH and 173 million of fully diluted shares, respectively. 15 At $4,700 per ETH, ETH per share was 0.0066 ETH, or $32.43. In one month, the price of ETH rose about 60%, and Bitmine’s ETH/share increased by 130%. In other words, Bitmine’s ability to arbitrage its mNAV premium through at-the-market equity ((ATM)) issuance and accretive purchases added significantly more value than holding ETH ￰35￱ course, this dynamic will persist only with an mNAV premium and ATMs deployed ￰36￱ the premium narrow or drop to a discount, DATs would have to rely on other capital-market tools, like liquidating a portion of their underlying token holdings to repurchase ￰37￱ Shapley Value decomposition method breaks down the drivers of Bitmine’s (BMNR’s) stock performance, attributing the changes to three variables: the ETH price, growth in ETH per share, and shifts in the mNAV premium or discount, as shown ￰38￱ of August 25, ETH/share had been the biggest contributor to BMNR’s price and shareholder return.).

Data as of August 25, ￰39￱ informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or ￰40￱ performance is not indicative of future ￰41￱ And Inexpensive Capital Liquidity is the main reason a DAT deserves a premium. At-the-market equity programs (ATMs) and convertible bonds work only if an equity is ￰42￱ ATM relies on meaningful daily turnover and a DAT’s ability to absorb steady share issuance without depressing the ￰43￱ same is true for convertibles: investors are buying a bond plus the option to convert into ￰44￱ option has value only if the equity is liquid enough to be sold or hedged ￰45￱ liquidity, the instrument will not attract serious investors and/or will become prohibitively expensive for the ￰46￱ also matters because debt markets typically serve large ￰47￱ banks and institutional lenders depend on demand in the secondary market, which is a function of market cap and float/liquidity.

In practice, most broadly syndicated debt deals and institutional convertible offerings are accessible only to companies with market caps greater than ~$1–2 ￰48￱ that threshold, the cost of capital rises sharply, and financing options often are limited to bespoke or venture-style credit facilities. MicroStrategy, for example, was able to issue multiple rounds of convertibles totaling billions of dollars because its equity was liquid and its market cap was in the tens of billions at the ￰49￱ share issuance illustrates the same ￰50￱ equity deals like those MicroStrategy has pursued require both balance-sheet heft and secondary liquidity to attract institutional ￰51￱ share buyers must believe that they will be able to exit or hedge ￰52￱ DATs have no access to this financing ￰53￱ other words, liquidity lowers the cost of ￰54￱ compensate for illiquidity, investors demand higher returns, so illiquid DATs have to pay up in one or more ways: deeper discounts on equity issuance, higher coupon rates on debt, or more onerous ￰55￱ contrast, a liquid DAT can raise capital less expensively 16 to accumulate BTC or ETH, creating a flywheel effect that reinforces the ￰56￱ Many investors compare crypto assets - especially L1 tokens - to equities, commodities, or currencies, even though they are more different than ￰57￱ Asset Treasuries (DATs) highlight this distinction and demonstrate how ETF wrappers can be an inefficient way to gain exposure to ￰58￱ DAT corporate structure offers optionality that investors often value at a premium to book ￰59￱ DATs can acquire tokens at a discount in distressed circumstances, such as the ongoing FTX bankruptcy sales, or through the purchase of other DATs trading below ￰60￱ illustrate, with a $10 billion market cap, Bitmine Immersion could issue just 2–3% of its stock and acquire an ETH-focused DAT worth $200 million at a discount, an accretive ￰61￱ such mergers and acquisitions (M&A), ecosystems like Solana and Ethereum offer other ￰62￱ those networks support tens of billions of dollars in liquidity and applications, a sufficiently scaled DAT can monetize by securing or providing liquidity on-chain.

Indeed, protocols might offer incentives to attract large, balance-sheet-heavy participants into their ￰63￱ arbitrage opportunity involves the spread between traditional and on-chain interest rates which, at times, has exceeded 500 basis points (bp), or 5%. 17 In a low-rate environment, DATs could borrow USD in traditional financial markets at a low cost and deploy the funds in on-chain lending pools at materially higher yields. Today, stablecoin pools like sUSDS, sUSDe, or SyrupUSDC offer annualized yields of ~7%, roughly 300bp (~3%) higher than Treasury yields, giving DATs the opportunity to capture incremental revenue streams beyond simple token ￰64￱ While DATs offer new ways to gain exposure to cryptoassets, they also introduce significant risks that investors must weigh ￰65￱ first is dependence on market ￰66￱ DAT model - particularly the growth in crypto per share - relies on stocks trading at a premium to ￰67￱ the premium compresses, a DAT’s ability to issue accretive equity diminishes and can disappear, forcing them to slow purchases or to liquidate tokens and repurchase shares.

Second, liquidity can cut both ￰68￱ liquid stocks enable access to inexpensive capital, they also can become the source of illiquidity during market ￰69￱ an extended downturn, DATs could enter a negative feedback loop: collapsing share prices, higher cost of capital, and potential redemptions that force token sales. Third, regulatory uncertainty looms ￰70￱ ETFs, DATs operate in a gray area that could invite scrutiny around accounting treatment, disclosures, and other regulatory questions which apply more to investment funds than to operating ￰71￱ intervention could impair access to capital markets or limit optionality. Fourth, governance and operational risks could be ￰72￱ DATs are managed by small teams overseeing multi-billion-dollar ￰73￱ controls, poor risk management, or misaligned incentives can erode value very ￰74￱ the worst case, some DATs could evolve into reckless on-chain hedge funds in disguise - chasing yield, levering up balance sheets, and allocating capital with limited transparency, creating the risk of hidden exposures and even ￰75￱ The rise of Digital Asset Treasuries offers a new way for investors to gain exposure to crypto ￰76￱ began with MicroStrategy’s seemingly idiosyncratic bet has evolved into a broader phenomenon, with DATs proliferating across Ethereum, Solana, and other leading Layer 1 blockchain ￰77￱ critics dismiss the model as “selling fifty cents for a dollar,” the reality is more ￰78￱ DAT corporate structure offers unique potential advantages - ones that ETFs cannot match - that justify their premiums to book value: the ability to increase ETH or SOL per share more quickly than the price appreciation of the underlying asset; the liquidity and scale to access inexpensive capital across the capital stack; and the optionality to pursue M&A, token purchases, and on-chain ￰79￱ ETFs, DATs are not passive wrappers for digital ￰80￱ are dynamic capital-market vehicles with the potential to magnify exposure, capture protocol yields, and allocate ￰81￱ some assets, they may prove not only to be more sustainable but also to be more efficient than ￰82￱ from a passing arbitrage, DATs could become enduring institutions at the intersection of the traditional financial markets and the new world of digital assets.

DISCLOSURE: Digital Asset Risk Digital assets, often referred to as cryptocurrencies, such as bitcoin and ether are relatively new investments, which have unique and substantial risks and which may be more volatile than other types of ￰83￱ assets operate without central authority or banks and are not backed by any ￰84￱ indirectly, digital assets may experience very high ￰85￱ assets are not legal tender. Federal, state or foreign governments could restrict the use and exchange of digital ￰86￱ asset exchanges could stop operating or permanently shut down due to fraud, technical glitches, hackers or ￰87￱ assets, like bitcoin and ether, are subject to rapid price swings, including as a result of actions and statements by influencers and the media, changes in the supply of and demand for the digital asset, and other ￰88￱ is no assurance that a digital asset will maintain its value over the long term. 1 Cryptocurrencies are classified as commodities rather than ￰89￱ such, spot Bitcoin and Ethereum ETFs are structured as commodity-based exchange-traded products (ETPs) registered under the Securities Act of 1933 (“33 Act”) rather than traditional investment companies that are registered under the Investment Company Act of 1940 (“40 Act”) like most other ETFs.

Therefore, although the spot Bitcoin and Ethereum ETFs are regulated by the Securities and Exchange Commission (SEC) to some degree, they do not offer the same investor protections as traditional investment companies that are subject to the regulations set forth by the 40 Act. 2 Based on data from Saylor, M. 2025. “Strategy has acquired 525 BTC for ~$60.2 million at ~$114,562 per bitcoin…” X. 3 Ibid. 4 See MicroStrategy. 2021. “MicroStrategy Completes $500 Million Offering of 6.125% Senior Secured Notes Due 2028 with Bitcoin Use of Proceeds.” 5 Carter, N. 2025. “in the end its going to be very funny…” X. 6 MSTR stock has outperformed the buy and hold strategy from the first bitcoin purchase of the company on August 11, ￰90￱ as of October 22, ￰91￱ stock went up from 14 usd to 300 usd (20.8x), versus bitcoin, which rose from 11,410 USD to 110,000 USD (9.6x).

MSTR stock’s outperformance of BTC price is attributable to the accretive usage of the share issuance to buy BTC. 7 Based on data from Blockworks as of August 25, 2025.8 Based on data from Blockworks as of August 25, 2025.9 A Digital Asset Treasury can use its corporate structure to exploit leverage and financing in ways an ETF ￰92￱ holding crypto directly on its balance sheet, a DAT can borrow against those reserves through secured loans or convertible bonds, effectively levering its ￰93￱ can also issue new shares if its stock trades at a premium to the value of its underlying assets, turning that premium into additional capital to buy more crypto.

ETFs, by contrast, are constrained to issuing and redeeming shares at net asset value and cannot borrow against their holdings, which limits them to passively tracking the asset. 10 Colloquially, “Layer 1 blockchain”—or “L1”—refers to the base protocol of a blockchain network, which is responsible for essential functions like transaction processing, consensus mechanisms, and data storage on its own chain. 11 As used within the crypto community, an “epoch” is a unit of time used primarily in the proof-of-stake (PoS) consensus system to organize validator activity and block finalization. 12 Liquid staking protocols are platforms that enable users to stake their cryptocurrency holdings on a Proof-of-Stake (PoS) blockchain while retaining liquidity via a yield-bearing token that rebases. 13 Based on data from UltraSound Money, data as of August 25, ￰94￱ calculation assumes that Ethereum yield is approximately 3%, resulting in a total of $300 million. 14 Based on data from Deepnewz. 2025.

“Bitmine ( BMNR ) Raises $250 Million, Sells 55.56M Shares, Stock Surges 400% as Tom Lee Launches "MicroStrategy of Ethereum" Treasury.” 15 Based on public data regarding prices of stock, ETH, and mNAV, for example, as of August 25, 2025.16 In finance, preferreds are hybrid securities—a class of stock that blends features of both stocks and bonds, offering fixed-dividend payouts and preferential claims on assets in bankruptcy or liquidation over common stockholders, but with lower priority than ￰95￱ known as preferred stock, they usually pay higher yields than common stock to compensate for their intermediate risk level and lack of voting rights. 17 Note: A basis point ((BP)) is equal to 0.01%, or one one-hundredth of a percentage ￰96￱ based on Pokorny, Z. 2025.

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