The DAT Debate: Different Perspectives on Digital Asset Treasuries

Digital Asset Treasuries (DATs) are under scrutiny as market conditions worsen, particularly following MSCI's potential index exclusion and significant sell-offs, such as SharpLink's $33.5 million ETH liquidation. Critics express concerns about the negative implications of DATs on cryptocurrency prices. However, some industry experts refute these claims, asserting that DATs do not contribute significantly to market selling pressure. The ongoing conversation highlights the complicated relationship between DATs and the broader crypto market.

Key Takeaways

Allegations of supply overhang and ties to venture capital (VC) have caused concern among some market participants.
The MSCI index review set for mid-January could influence the future of this sector.
Digital Asset Treasuries (DATs) are back in focus due to MSCI's potential exclusion threats and recent downturns in the market.
Notably, SharpLink, a DAT primarily focused on Ethereum, recently sold off $33.5 million worth of ETH, exacerbating market fragility.
Although the transactions prompted criticism, some industry insiders, like Hasseeb Qureshi of Dragonfly VC, argue that DATs do not represent net selling pressure.

Source: X
Qureshi predicts that DATs may begin buying again if their market net asset values (mNAVs) rise above 1.

Digital asset treasuries aren’t net bad for crypto, says VC

Understanding the Selling Pressure

Addressing the sell-off driven by SharpLink and other firms facing mNAVs below 1, Qureshi stated, "Markets are not moving because of DAT selling. Almost no DATs have sold anything. The ones that have are tiny."

Major VC firms such as MultiCoin Capital played a role in establishing Forward Industries, one of the largest treasuries focused on Solana. Smaller players have also been backed by venture capitalists, blockchain foundations, or through individual fundraising efforts. Given the notorious trend of "VC tokens" that often flood the market after their vesting periods, skepticism remains regarding these VC-led DATs.

The Impact of Crypto Treasury Losses

Despite the concerns raised, leading DAT companies like BitMine Immersion and Forward Industries, focused on Ethereum and Solana respectively, reportedly had not sold any holdings at the time of this writing. Additionally, the anticipated reclassification of DATs by MSCI could apply more pressure not only on this niche but on the entire cryptocurrency market, according to various analysts.

David Bailey characterized the potential exclusion of DATs as “Operation ChokePoint 3.0,” paralleling it with previous restrictions on banking access for crypto firms during the Biden administration. He remarked, "For a systemically important equity index to single out Bitcoin and digital asset companies for deindexing and ineligibility after years of actively blessing their inclusion is discriminatory and capricious. We should call it what it is: Operation Choke Point 3.0."

As a result of these dynamics, digital treasuries have experienced a staggering loss of over $45 billion in value, dropping from $140 billion to $97 billion during the fourth quarter correction.
Digital asset treasuries DATs
Source: The Block