Digital asset treasury companies (DATs) are gaining popularity among investors as a way to take leveraged bets on cryptocurrencies. These companies allow investors to trade an inflationary asset (dollars) for a scarce asset (cryptocurrency), aiming to increase holdings per share. One such leader, Strategy (MicroStrategy trading under MSTR), has seen its shares value at twice the amount of its bitcoin holdings.
The strategy involves using borrowed capital to boost returns, which looks attractive when prices are rising but can be detrimental in downturns. Some investors have been drawn to DATs due to their potential for high growth, with some companies reporting yields as high as 225%. However, this approach also carries significant risks, including the possibility of sharp price drops and a vicious cycle if prices fall.
The risk lies not only in the volatility of cryptocurrencies but also in the reliance on borrowed capital. When investors lend money to DATs at zero-coupon convertible notes, they are essentially providing free money with the expectation of making out handsomely in the future. However, if bitcoin prices drop and the stock doesn’t perform, bond investors may demand their money back, potentially forcing the company to sell some of its crypto holdings.
As a result, equity buyers should exercise caution when considering investments in DATs, which have been engaging in financial alchemy by using cryptocurrency yields to attract investors. With many companies backing DATs and other cryptocurrencies, the market is becoming increasingly crowded and complex.
Source: https://www.axios.com/2025/06/03/crypto-strategy-bitcoin-digital-asset-treasuries