Digital Asset Treasuries are crypto’s latest hype — and maybe its next bubble

Economic

Summary:

Digital Asset Treasury companies boomed by holding crypto on balance sheets, but falling prices and shrinking mNAV premiums now threaten their model. Forced token sales, dilution risks, and structural fragility raise fears of a bursting DAT bubble.

The term Digital Asset Treasury companies, known as DATs or DATCOs, has emerged as one of the biggest buzzwords in the digital currency industry this year, providing investors with a novel way to play crypto — but with new risks.

A DAT is effectively a publicly-listed entity that holds cryptocurrencies like bitcoin or ether and provides investors with exposure to the underlying digital currency. DATs aim to outperform the price action of the cryptocurrency that they hold.

But with crypto markets seeing a big plunge in recent weeks, the strategies of DATs has come under scrutiny and raised concerns about whether they could add further pressure to an already weak crypto market.

What is a DAT?

A Digital Asset Treasury is a type of company that buys and holds cryptocurrencies directly on its balance sheet. Investors can buy shares of that entity to get exposure to the underlying digital asset.

The original — and one of the biggest DATs — is Michael Saylor’s Strategy which began buying bitcoin in 2020 and has done so ever since.

But more recently, there has been an explosion of this type of vehicle. In 2021, fewer than 10 companies held bitcoin in their treasuries, according to DLA Piper. That number has since jumped to 190 companies, while another 10 to 20 firms are focused on alternative digital assets as of September, DLA Piper said.

These DATs hold around $100 billion worth of cryptocurrencies combined, according to data from The Block.

Why do DATs exist?

The DAT explosion this year has been driven by buoyant crypto markets and more favorable regulation in the United States toward the industry.

But their growth has also come at a time when it’s easier than ever to buy cryptocurrencies directly or invest in the asset via other regulated entities like exchange-traded funds (ETFs).

DATs are intended to outperform the underlying assets which they hold. They can achieve this through various strategies to maximise returns. In contrast, ETFs effectively hold the cryptocurrency passively and issue shares backed one-to-one with the actual asset.

DATs can also provide regulatory certainty to investors, according to a note from Macquarie published last week. They “package crypto assets within SEC-regulated securities,” the investment bank’s analysts said. “This eliminates regulatory ambiguity and ensures the same public reporting, disclosures, and investor protections as any public equity.”

Carol Alexander, professor of finance at Sussex University, told CNBC that DATs also offer an option to “institutional and professional investors with regulatory, fiduciary or operational constraints that make direct token ownership or crypto ETFs unsuitable.”

DAT strategies

DATs offer unique capabilities that ETFs cannot, employing a range of strategies to enhance investor returns.

To assess the performance of these DATs, a metric known as market net asset value, or mNAV, is closely watched. It compares a company’s enterprise value to the value of its digital asset holdings. It can show how much of a premium investors are assigning to a DAT, with an mNAV over 1 signifying a premium.

DATs can use an at-the-market (ATM) equity program to increase their crypto holdings. When its share price exceeds the net asset value of the crypto holdings, a DAT can issue more shares at a premium and therefore raise cash. That allows the DAT to fund the purchase of more crypto — as has been the case for Strategy.

“This creates a crypto-per-share accretive feedback loop: the issuer raises equity, accumulates tokens, and sees its NAV per share increase, further increasing the premium, representing accretive dilution,” Macquarie explained.

Staking is another strategy that is employed by DATs. It allows a holder of cryptocurrency to earn yield, similar to interest, on their assets. To stake, an investor effectively locks up their crypto on a blockchain to help the network run better. In return, the investor receives a return in the form of more crypto. However, unstaking crypto can take several weeks, which may limit ETFs and similar products from fully embracing staking, given their need for liquidity and stable asset values.

Staking creates free cash flow that “can be redeployed into mergers and acquisitions (M&A), token purchases, on-chain opportunities, or shareholder distributions,” ARK Invest said in a note last month.

As the market advances, there are likely to be new trading strategies employed by DATs.

What happens to DATs when the market plunges?

DATs have come into focus amid recent crypto market turmoil, with bitcoin well off its all-time high.

As crypto prices fall, mNAV may fall under 1, meaning companies are trading at a discount to their crypto holdings. This can create a number of issues.

“When the crypto market pulls back, DATCOs face pressure and they have a limited menu of realistic responses,” Alexander said.

“Some may double‑down and hold, viewing the drop as a buying opportunity for future appreciation. Others may need liquidity, especially those that used financing (e.g. debt, convertible bonds, share issuance) which can force them to sell part of their token holdings.”

And an mNAV premium is key for the DAT market.

“The viability of DATCOs is closely tied to the persistence of an equity premium to NAV. If this premium erodes or reverses to a discount, the model faces significant challenges,” Macquarie analysts said.

The investment bank also notes that if a DAT’s stock price falls or near NAV, equity issuance becomes dilutive, meaning “new shares issued no longer increase crypto per share, but rather dilute existing shareholders’ exposure. This can break the self-reinforcing cycle that sustains the premium.”

Meanwhile, the explosion in the number of DATs and growing interest from investors creates its own risks.

“The sector is becoming increasingly crowded, with capital flowing in according to an established playbook. This influx, however, increases structural fragility. Should any of the key variables - investor sentiment, crypto prices, or capital market liquidity - fall, the DATCO model could unravel,” Macquarie said.

Strategy has sought to protect itself against the downturn. On Monday, the company announced a $1.44 billion U.S. dollar reserve that was funded by the sale of more stock. The reserve is designed to support the payment of dividends and service debt, Strategy said.

James Butterfill, head of research at CoinShares, said other DATs may follow Strategy’s decision to dilute shareholders.

“It is not particularly confidence-inspiring: it highlights both their dependence on, and their expectation of, a recovery in token prices,” Butterfill told CNBC.

“We do expect token prices to rebound, particularly if the Federal Reserve delivers a December rate cut, which should help these companies avoid forced liquidations. Nevertheless, the episode underscores the inherent fragility of the DAT model.”

Will DATs impact crypto prices?

If mNAVs continue to fall and DATs don’t have the means to keep afloat, they may turn to selling digital tokens which could put pressure on crypto markets.

“As token prices drop, even the highest‑profile DATs have begun scaling back. This can amplify volatility in the broader crypto markets, because DATs are large holders: their sales, even if staggered, increase supply into already weakened liquidity conditions,” Alexander said.

For now, DATs’ digital currency holdings account for less than 1% of the total crypto market. But as their influence potentially grows, they may have more of an impact on braoder markets.

“As DATCOs scale, their market influence grows; an unwind could weaken a major tailwind for crypto, namely the normalization of digital assets on corporate balance sheets,” Macquarie said. “This, in turn, could dampen public equity interest in digital asset exposure, slow crypto ETF inflows, and pressure cryptocurrency prices.”

Has the DAT bubble burst?

The DAT space is currently in a bubble, according to Sussex University’s Alexander.

“The DATCO model seems to have attracted many entrants driven more by marketing, hype and easy capital than by durable business fundamentals,” she told CNBC.

CoinShares’ Butterfill said the “bubble has already decisively burst,” with many DATs now trading at mNAVs below 1 and a “clear signal that the market fears” these companies will be forced to sell their digital assets.

However, both experts said DATs may evolve in the future.

“Over the longer term, investors are likely to demand a more measured approach,” Butterfill said.

“Tolerance for shareholder dilution and for extremely high token concentrations without accompanying revenue streams will diminish. The recent frenzy of token accumulation has, in many ways, undermined the original intent of the DAT concept: credible global companies seeking diversification from fiat-currency and depreciation risks.”

Alexander said that these digital asset treasury firms may also begin to diversify their holdings into non-crypto assets too.

“I believe those that pivot toward operations such as yield‑generation through staking, increasing the diversification of their tokens, and mix with token traditional assets like cash or T-bills, may survive as legitimate digital‑asset infrastructure players,” Alexander said.

Source: cnbc

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Adam

Economic

For two decades, the playbook for Big Tech was fairly simple and extremely successful: Create disruptive innovations, deliver blinding growth rates and keep a lid on spending.

A handful of behemoths like Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp. used this formula to seize market share from legacy businesses and power the US stock market to record after record. But a key part of the program — the relatively small amount of capital required to generate those huge profits — is increasingly under threat from the race to develop artificial intelligence.

“They’re some of the best business models the market has ever seen,” said Jim Morrow, chief executive officer at Callodine Capital Management, which oversees $1.2 billion in assets. “Now you’ve seen this explosion in capital intensity to the point where it’s now the most capital intensive sector in the market. That’s just a radical change.”

Those four companies alone are expected to devote more than $380 billion combined to capital expenditures in their current fiscal years, with most going to chips, servers and other data center-related expenses. That’s a more than 1,300% jump from a decade ago. And they’ve all pledged to spend significantly more in the year after that.

Microsoft’s capex is now 25% of its revenue, more than three times what it was 10 years ago, according to data compiled by Bloomberg. The software and cloud-computing giant’s spending-to-sales ratio is among the top 20% in the S&P 500, as are Alphabet’s and Amazon’s, well above companies in traditionally capital-intensive industries like oil and gas exploration and telecommunications.

Big Tech’s ‘Spend Little, Earn Lots’ Formula Is Threatened By AI_1

Despite the uncertainty of future payoffs, investors are giving the tech giants the benefit of the doubt on their AI plans, at least so far. Almost all of the big spenders have seen their stock prices rise this year, and their valuations are elevated. For example, Microsoft shares are up 16% in 2025, and the stock is priced at more than 28 times profits projected over the next 12 months, higher than its 10-year average of roughly 27 times and the S&P 500’s multiple of 22, according to data compiled by Bloomberg.

But there are creeping signs of doubt. Meta, which owns Facebook and Instagram, was punished after its third-quarter earnings report because Chief Executive Officer Mark Zuckerberg failed to chart a convincing path to bigger profits from rising AI spending. The stock had its worst session in three years on Oct. 30, plunging 11% the day after Meta reported earnings, and it has lost an additional 3.7% since then. After soaring 25% through the first three quarters, the shares are now up 9.6% for the year, underperforming the S&P 500.

One area of controversy is rising depreciation expenses from AI chips and servers. Michael Burry, the hedge fund manager made famous by the book , suggested that such equipment should be written down on a faster schedule, which would seriously dent the companies’ profit growth.

The spending is also weighing on free cash flow, which could limit the expansion of capital returns to shareholders via stock buybacks and dividends. Alphabet, for example, is projected to generate free cash flow of $63 billion this year, down from $73 billion last year and $69 billion in 2023. Meta and Microsoft are expected to have negative free cash flow after accounting for shareholder returns, while Alphabet is seen roughly breaking even, according to data compiled by Bloomberg Intelligence.

At the same time, many companies are increasingly turning to debt and off-balance sheet vehicles to fund their spending, which raises its own risks. Meta, for instance, recently sold $30 billion of bonds in the largest public high-grade corporate debt deal of the year and arranged a roughly $30 billion private financing package.

Lower valuations could be the result of this shift from capital-light to capital-intensive business models, according to Michael Bailey, director of research at Fulton Breakefield Broenniman.

“A more capital-intensive business will probably have more of a boom-bust cycle,” he said. “Investors generally pay less for that.”

With seven technology companies accounting for about a third of the market capitalization weighted S&P 500, lower multiples would almost certainly weigh heavily on the benchmark. All of which highlights the uncharted territory investors are in when it comes to AI spending. Never before have the world’s biggest and most successful companies all decided to throw so much cash at a promising, but unproven, technology.

“These are companies that historically have not really had to compete with each other. They’ve all had their own niche in a fairly oligopolistic or monopolistic sort of niche of the market, where they derived huge profits in low capital intensity businesses, and now they’re all kind of squaring off with different high capital intensity AI business models,” Callodine’s Morrow said. “An uncertain outcome at a really high multiple is the risk I think the market has to grapple with.”

Source: Bloomberg

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Manuel

Economic

The offices of seven state Democratic attorneys general asked providers of Buy Now, Pay Later services for details about the cost and structures of their installment loans, as well as consumers’ ability to repay them.

Klarna Group Plc, Affirm Holdings Inc. and Afterpay Ltd. were among the six companies that were sent letters on Cyber Monday from the group that included Connecticut and North Carolina. The companies were asked to provide detailed information about their loan products and customer interactions within 30 days.

In a statement announcing the letter, Connecticut Attorney General William Tong expressed concern that heavy marketing of such services was luring consumers into costly and onerous arrangements. PayPal Holdings Inc., Sezzle Inc. and Zip Co. Ltd. also received letters. An official in Tong’s office along with officials from California, Colorado, Illinois, Minnesota and Wisconsin signed onto the letters.

“Buy now, pay later may appear to be a convenient way to afford a purchase, especially now during the holiday season, but shoppers need to watch out for debt traps,” Tong said.

A spokesperson for Klarna said it is “committed to protecting consumers” and Affirm said the company has “long-supported thoughtful regulation and consistent industry standards.”

PayPal is “focused on helping consumers purchase what they need,” a spokesperson said.

Representatives for Sezzle, Zip and Afterpay didn’t immediately respond to requests for comment.

Tong said the states were responding to pullback in federal regulation. Earlier this year, the Consumer Financial Protection Bureau revoked an interpretive rule stating that many Buy Now, Pay Later services were subject to the same rules as credit cards. Under the Biden administration, the bureau had begun to expand its oversight of such firms.

“As Trump rescinds critical protections for buy-now-pay-later consumers, it’s up to states now to ensure shoppers know what they are getting into, and to ensure these companies are held accountable,” Tong said.

The changes in federal oversight coincides with an explosion in installment loans. Buy Now, Pay Later transactions are expected to reach $687 billion in volume by 2028, compared to $334 billion last year, according to projections by Juniper Research.

The state officials asked the companies to describe how they analyze delinquencies and borrowers’ ability to repay, as well as their procedures for tracking and resolving consumers’ disputes. The state officials also inquired about the companies’ compliance with the federal Truth in Lending Act, which specifies rules for open-end credit such as credit cards and home-equity lines.

Source: Bloomberg

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Adam

Economic

The BlackRock Investment Institute said on Tuesday it is turning bearish on long-term U.S. Treasuries, warning a coming wave of AI-related financing could put upward pressure on U.S. borrowing costs and exacerbate worries over U.S. government indebtedness.

In recent weeks, investors have been zeroing in on how big tech’s push into AI will likely mean hundreds of billions in new debt over the coming years. The added leverage is not expected to seriously dent the sector’s still strong balance sheets, but the borrowing spree is unfolding against a backdrop of already elevated public debt in the U.S. and other developed markets, stoking broader concerns about rising leverage across the financial system.

"Higher borrowing across public and private sectors is likely to keep upward pressure on interest rates," BII, a division of U.S.-based BlackRock focused on investment research, said in a 2026 global investment outlook report.

It said it turned "underweight" on long-term Treasuries for the next six to 12 months from a previous "neutral" view.

"A structurally higher cost of capital raises the cost of AI-related investment and affects the broader economy," it said. "A more leveraged system also creates vulnerabilities to shocks such as bond yield spikes tied to fiscal concerns or policy tensions between managing inflation and debt servicing costs." U.S. national debt is at a record high of over $38 trillion.

The institute's investment outlooks are based on views from senior portfolio managers and investment executives at BlackRock, the world's largest asset manager.

While an AI-driven productivity boom could eventually support government revenue and therefore ease the U.S. debt burden, such a process will take time, it said.

BlackRock remains optimistic that AI-related investments will continue to propel U.S. equities higher next year, said the institute. But while it expects AI-driven revenue gains to lift the economy broadly, it also anticipates that technological advances will benefit some companies more than others.

"Entirely new AI-created revenue streams are likely to develop. How those revenues are shared is likely to evolve – and we don’t yet know how. Finding winners will be an active investment story," it said.

Outside of the U.S., BlackRock turned more underweight for the next six-to-12-month period on Japanese government bonds due to the prospect of higher interest rates and heavier bond issuance.

On the other hand, it changed to an "overweight" view on emerging-market hard-currency debt from a previous "underweight" view, due to limited issuance and healthy government balance sheets.

Source: reuters

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Justin

Central Bank

President Donald Trump said he plans to announce his selection to lead the Federal Reserve in early 2026, fueling further speculation about the next leader of the US central bank.

"We'll be announcing somebody, probably early next year, for the new chairman of the Fed," Trump said Tuesday during a Cabinet meeting at the White House.

Trump's comments offer a clearer timeline for the announcement. Treasury Secretary Scott Bessent, who has been overseeing the selection process, previously said the pick could be revealed around Christmas.

The president on Sunday told reporters he knew who he would nominate, without offering further details.

Trump for months has pressured the Fed to lower interest rates, and naming a successor to Jerome Powell, whose term as Fed Chair expires in May, would give the president his biggest chance yet to reshape the institution. Trump has criticized Powell as being too slow and timid in pursuing cuts, and the president has signaled he expects his replacement to move more forcefully to lower rates.

Trump repeated those criticisms Tuesday, calling Powell a "stubborn ox, who probably doesn't like your president." Though Powell's term as chair ends next year, he could remain on the board for two more years as a governor.

White House National Economic Council Director Kevin Hassett is seen as the likely choice to succeed Powell, people familiar with the matter told Bloomberg News last week.

Still, Trump is known to make surprise personnel and policy decisions, meaning a nomination is not final until it's made public. Other finalists have included Fed Governors Christopher Waller and Michelle Bowman, former Fed Governor Kevin Warsh and BlackRock's Rick Rieder.

Trump in September singled out Hassett, Warsh and Waller as his top three candidates. Trump also regularly says he'd like Bessent as chair, though the Treasury secretary has repeatedly rejected the notion.

Fed chair and governor picks typically represent the most direct way for presidents to influence the central bank. But Trump has been vocal in criticizing the Fed for moving too slowly to cut borrowing costs and for expensive renovations of its campus. The White House also is engaged in litigation over Trump's attempted dismissal of Fed Governor Lisa Cook.

Whomever Trump picks will require Senate confirmation as chair. If the selection is an outsider, the person would likely receive a 14-year Fed governor term that begins Feb. 1.

Source: Bloomberg Europe

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Adam

Cryptocurrency

Bitcoin climbed back above $90,000 on Tuesday, recovering from a bruising selloff that caught Wall Street off guard and erased nearly $1 billion in fresh leveraged bets. The rebound offered a brief respite in a months-long rout, but traders remain cautious, with sentiment still fragile and signs of stress persisting across crypto markets.

The original cryptocurrency rallied as much as 5.6% to $91,269, while its next biggest rival - Ether - rebounded by more than 8% to push its price back above $3,000. Smaller, less liquid tokens such as Cardano and Chainlink jumped more than 10%. Even so, several metrics point to a potentially uneven recovery, market watchers said.

The Bitcoin funding rate — a key measure of crypto market sentiment — has turned negative in the last few days, according to CryptoQuant, meaning there is more demand for bearish bets in the perpetual futures market than for bullish positions.

Bitcoin Jumps Back Above $90,000 After Bruising Selloff_1

“Overall sentiment is cautious,” said Chris Kim, chief executive of quantitative asset management protocol Axis. “Crypto-native traders are nervous.” Institutional investors, meanwhile, appear to be waiting for the Federal Reserve’s interest rate decision next week before adding risk, he said.

Bitcoin has fallen almost 30% since hitting a record in early October, leaving the digital asset market on fragile footing after a weeks-long selloff. The downturn accelerated when roughly $19 billion in leveraged bets were wiped out.

Virtual currencies associated with US President Donald Trump’s family have been caught up in the selloff. Shares of American Bitcoin Corp., the crypto miner co-founded by Eric Trump, wiped out more than half of their value in less than 30 minutes on Tuesday, even as trading in the stock was halted multiple times due to intense volatility. The stock fell as much as 51%.

TRUMP, his official memecoin, collapsed from a record high of around $73.40 right after its launch in January. It’s now trading at around $6, according to CoinGecko. WLFI, the token of Trump-linked decentralized finance platform World Liberty Financial, is down roughly 30% from September’s high. MELANIA, the memecoin of First Lady Melania Trump, is trading at 13 cents, having lost nearly all its value since January’s peak.

‘Extreme Fear’

In another sign of investor wariness, crypto exchanges have seen balances of stablecoins such as USDT and USDC rise, suggesting traders are parking capital rather than aggressively buying dips, according to analysts at Bitfinex.

“This is typical in late-cycle corrections: investors hedge by moving into stablecoins until ETF flows stabilize and macro uncertainty clears,” the analysts said in a note. “Importantly, this is not the behaviour seen at long-term tops, where stablecoin liquidity drains; here, liquidity is building up on the sidelines, indicating dry powder waiting for clarity.”

Underscoring the investor wariness, CoinMarketCap’s “Fear and Greed Index” stood at a level indicating “extreme fear” on Tuesday, having spent the last three weeks around that zone.

Market sentiment has also been dampened by a plunge in shares of Michael Saylor’s Strategy Inc. which has led to concerns that the Bitcoin accumulator might have to sell some of its holdings. On Monday, the company sought to assuage fears by saying it had created a $1.4 billion reserve to fund future dividend and interest rate payments.

The company’s mNAV — a key valuation metric comparing the firm’s enterprise value to the value of its Bitcoin holdings — sat at about 1.16 on Tuesday, according to its website.

Source: Bloomberg

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Adam

Commodity

Gold and silver prices are lower in early U.S. trading Monday, on profit-taking from the shorter-term futures traders and amid improved trader/investor risk appetite in the general marketplace. Gold hit a six-week high on Monday, while silver hit a record high. February gold was last down $30.50 at $4,244.40. March silver prices were down $0.907 at $58.235.

Global stock markets were mixed overnight. U.S. stock indexes are pointed to higher openings when the New York day session begins. Risk appetite is better today, following good demand for Japanese bonds that Japan’s government held today. On Monday the global bond markets were a bit jittery because of political/financial/economic worries regarding Japan.

In other news, U.S. envoy to meet Putin in Moscow. U.S. envoy Steve Witkoff is traveling to Moscow to meet with Russian President Vladimir Putin to discuss a potential peace plan to end Russia’s war with Ukraine. Putin claimed Russian troops had taken the city of Pokrovsk in Ukraine's eastern Donetsk region, but Ukraine's military staff spokesman denied the claim. Witkoff is due to hold talks with Putin on the latest proposals for ending Russia's invasion of Ukraine, following negotiations between U.S. and Ukrainian officials in Florida this past weekend.

OECD: world economy doing better than expected. The Paris-based think tank Organization for Economic Cooperation and Development (OECD) said the global economy is weathering U.S. and other countries’ trade tariffs better than expected due to strong investment in artificial intelligence and supportive fiscal and monetary policies. The OECD raised its U.S. and European area economic growth forecasts for this year and next but still predicts global growth will slow to 2.9% in 2026 from 3.2% in 2025. The OECD cautioned that the outlook is “fragile” and its projections are “subject to substantial risks” due to concerns about swift changes in trade measures and the risk of abrupt price corrections in the tech sector.

The key outside markets today see the U.S. dollar index up a bit. Crude oil prices are slightly down and trading around $59.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.08%.

Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.

Price pressure on gold, silver amid better risk appetite_1

Technically, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $4,433.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,100.00. First resistance is seen at the overnight high of $4,269.20 and then at $4,300.00. First support is seen at the overnight low of $4,210.20 and then at $4,200.00. Wyckoff's Market Rating: 7.5.

Price pressure on gold, silver amid better risk appetite_2

March silver futures bulls have the strong overall near-term technical advantage. Their next upside price objective is closing prices above solid technical resistance at $60.00. The next downside price objective for the bears is closing prices below solid support at $52.50. First resistance is seen at the overnight high of $58.475 and then at the contract high of $59.435. Next support is seen at this week’s low of $56.85 and then at $56.00. Wyckoff's Market Rating: 9.0.