The Dilemma of DAT: How to Maintain Current Strategies in a Bear Market

Author: Prathik Desai

Source: Token Dispatch

Compiled by: Shaw Jinse Caijing

Introduction

There is a simple theory behind why companies purchase cryptocurrencies on their balance sheets. If the assets they acquire appreciate in value, their stock prices should also rise. The purpose of companies holding cryptocurrencies is to provide investors with a clearer and more leveraged way of holding cryptocurrencies, managed by a trustworthy team.

This strategy works well in a bull market, as almost any strategy can be effective in such market conditions. However, in a bear market, this strategy does not perform as well because the logic reverses.

According to most traditional definitions, cryptocurrencies have officially entered a bear market. Bitcoin (down about 30%), Ethereum (down about 40%), and Solana (down about 55%) are all far below their peaks and have fallen below the 200-day moving average. The Bitcoin spot ETF, which was originally expected to represent stability and regulated demand, has seen a net outflow of funds for three consecutive weeks. On-chain data indicators also confirm this. The Market Value to Realized Value ratio (MVRV) of Bitcoin has dropped to its lowest level in two years, with many holders now in a state of loss.

If most of your company's assets are cryptocurrencies, then the situation is not good. Worse still, if the market no longer sees you as a company, but rather as a publicly traded cryptocurrency wallet, and also views your employees as part of its value.

This is what the Digital Asset Treasury (DAT) is currently experiencing. This article will present the “hypothetical” scenarios that were once considered extremely rare for DAT, which have now become a reality with the arrival of the bear market.

The dilemma of DAT has become apparent.

Digital Asset Treasury (DAT) refers to companies that have become publicly listed cryptocurrency investment vehicles, either intentionally or unintentionally, and have operational departments. For most of the past year, the market has viewed them as high beta versions of underlying cryptocurrencies. During market downturns, high beta becomes less appealing.

The economic recession has now arrived, and the situation is quite severe. A few months ago, when I wrote my first quantitative analysis article, DAT stocks had already fallen from their highs. At that time, the risks were also apparent, but seemed far off. Now, these risks have become imminent.

Since the most severe liquidation event in cryptocurrency history in October, the stock price of DAT has fallen far more than the price drop of the tokens it holds.

Their market value to net asset value ratio (mNAV) — the simplest measure of the market's valuation of their treasury reserves — has fallen to 1 or lower. Even the most well-known representative of corporate Bitcoin strategies, Strategy (formerly MicroStrategy), currently has an mNAV that has dropped to its lowest point in 21 months.

Everything was expected and is not surprising. It’s just that the bear market has transformed the theoretical risks of Bitcoin treasury trading, including dilution, leverage, cyclical fluctuations, and investor patience, into observable and measurable realities. The question of “What if…” is now reflected in the mNAV chart.

Why the market suddenly pays attention to mNAV factors

If you hold Bitcoin, you know exactly what you have. But if you hold shares in a company that holds Bitcoin, the situation becomes a bit more complex. Different DATs may vary. Taking Strategy as an example, you might hold low-interest bonds, which you can choose to convert into company stock upon maturity.

A simple way to measure this complexity is to use mNAV. It reflects how much extra shareholders are willing to pay for this packaging.

When the mNAV ratio is above 1, shareholders believe that this packaging adds value to the company's existing business. They may have confidence in the management team, growth prospects, or believe that a company with a Bitcoin balance sheet should have more upside potential than Bitcoin itself. Sometimes they simply enjoy this volatility. For traditional investors who have never ventured into cryptocurrency, this can be more appealing and a more direct path.

When mNAV is below 1, investors believe that the company's value is less than the value of the cryptocurrencies it holds.

The decline in value may be due to excessive leverage in cryptocurrencies, poor operational performance, or inadequate corporate governance. However, the basic concept of an mNAV below 1 is simple: gaining exposure to the crypto assets obtained by the company is not as good as directly purchasing the asset.

For most of 2025, the mNAV of cryptocurrency treasury companies has been slowly declining after experiencing the initial growth typically seen by newly established DATs. Since October, these companies' mNAV has approached or fallen below 1.

When mNAV falls below 1, it will also become difficult to issue new shares at a premium, which in turn makes it challenging to provide funding for additional cryptocurrency purchases. Most DATs enrich their funds through stock financing, including market price issuance (ATM), follow-up issuances, or bonds convertible into shares. This economic model can only operate effectively when the trading price of the stock exceeds the value of the tokens held per share.

This model is prevalent across various crypto assets and companies of different sizes. Whether it is Bitcoin, Ethereum, or Solana treasury, their mNAV has approached around 1, or even fallen below it. Both small, experimental projects and flagship projects have not been spared. The reasons may vary from person to person—some believe it is due to leverage effects, others think it is equity dilution, and some consider it a business model issue. However, the market has clearly indicated that this packaging form itself carries risks, while the underlying assets do not have such risks.

In some cases, even when considering the company's other businesses, investors still value the company lower than the value of the cryptocurrencies it holds. Strategy is one of the best examples.

Wobbly Strategy?

Michael Saylor's Strategy has consistently been the most prominent DAT strategy laboratory in the world. It has consistently executed this strategy on a large scale. This is the purest bet by a corporation on the long-term appreciation of Bitcoin in the public market.

However, its mNAV is currently at the lowest point in 21 months, now below 1.

For most of 2024 and early 2025, the trading price of Strategy maintained a significant premium compared to the value of the Bitcoin it held. Investors view its stock MSTR as a leveraged Bitcoin exposure tool with an accompanying operating business. In a cyclical market, this premium makes sense: the company accumulates Bitcoin, the price of Bitcoin rises, and the leverage amplifies the stock's upside potential.

The same logic now applies in reverse.

The basic mNAV of Strategy has fallen below 1 for the first time since the beginning of 2024. The company has slowed down its Bitcoin purchases over the past two months. But just as I was typing this, my phone alerted me that Strategy has added another 8,178 Bitcoins to its treasury. However, the risks in the system remain significant.

Due to this example, the DAT route now looks riskier than ever. When investors are skeptical of projects that have a first-mover advantage and whose average Bitcoin purchase cost is below $75,000, the entire packaging strategy begins to show cracks.

Bitcoin purchases slow down

Another worrying signal is that the number of enterprises purchasing Bitcoin is decreasing.

Since August 1st of this year, DAT has purchased a total of 115,000 Bitcoins, of which only 17,000 were bought after October 11th. This includes 8,178 Bitcoins purchased by Strategy at the time of writing this article. In the two months leading up to the liquidation event in October, DAT had increased its treasury by 90,000 Bitcoins.

Although it is rational to do so in a bear market, it also exacerbates the issue of mNAV premium. If a company does not increase its reserves when prices fall, it indicates negative sentiment within the DAT management team. This can lead shareholders to question whether the company's operations are strong enough to warrant continued investment. Once this doubt arises, the mNAV premium will disappear.

Where to go from here?

For most of the past year, DAT business and cryptocurrency have been viewed as interchangeable concepts. But this is not the case. Cryptocurrencies do not have debt covenants or operational losses, while companies do. These DATs still need to report good performance to maintain investor confidence.

The bear market has exposed the longstanding issues with DAT and has sounded an important alarm for investors.

The leverage risk exposure of cryptocurrencies will now seem more dangerous, and the underlying operational business will also undergo thorough scrutiny. Sustained stable accumulation will be difficult to package as a marketing slogan. All of this will be reflected in mNAV.