Bitwise CIO says most DATs are heading for discounts, not incentives: here’s why

Bitwise’s chief investment officer, Matt Hougan, said As of Sunday, most Digital Asset Treasury (DAT) companies are unlikely to maintain premiums over their underlying crypto holdings, arguing that operating costs, liquidity constraints and execution risks outweigh the limited ways in which companies can reliably grow their crypto per share.

Hougan has created a model that starts by treating a DAT as finite, weighing the predictable forces that squeeze its price under its holdings against the few, often uncertain ways it can increase crypto per share.

“Most will trade at a discount, and only a few exceptional companies will trade at a premium,” Hougan tweeted, explaining why DATs “will have a high hurdle.”

Most of the downward pressure on DAT valuations could come from “illiquidity, costs and risk,” factors he described as “certain” across the sector

Hougan broke the discount side of the equation into three parts, starting with “illiquidity,” which he illustrated by asking why someone “would pay full price today for bitcoin that you would receive in a year.”

For Hougan, the gap between immediate ownership and deferred delivery creates an automatic price reduction that widens as the holding period or perceived friction increases.

He then pointed to “cost” and “risk” as additional sources of drag, noting that “every dollar spent on operating costs or executive compensation comes out of your pocket,” and that investors should consider the likelihood that a company “makes a mistake somehow.”

Taken together, these factors form the basic discount investors place on a DAT before considering whether any upside leverage can offset this.

Hougan said only a limited number of strategies can offset this structural drag, pointing to the “four main ways” DATs are trying to grow their crypto-per-share.

These include issuing debt, lending tokens, using options and buying assets at a discount; steps that he believes only work under the right conditions and only if they are implemented without adding new risks.

Hougan added that “costs and risks increase over time,” meaning the barrier to a perpetual DAT only increases, while any gains per share of cryptocurrency will need to be replicated through cycles.

Sentiment shift

Hougan’s comments come as broader sentiment around DATs continues to shift, with market commentators arguing that regulated exchange-traded funds can offer cleaner exposure with fewer moving parts.

On Saturday, with reference to a prior Declutter part on ETF Staking, Nate Geraci, Co-Founder of The ETF Institute, called Spots Crypto ETFs ‘DAT Killers’ That Ended the Period When Treasuries Flourished ‘Through Regulatory Arbitrage’.

In response to Geraci on Sunday evening: Bloomberg senior ETF analyst Eric Balchunas argued that ETFs essentially perform the same function as DATs, but “with good tracking,” meaning they better reflect the performance of the underlying assets.

Balchunas added that while some institutions may only hold stocks or bonds, which gives structures like MicroStrategy a remaining use case, he believes that audience is “not enough for some of them to thrive.”

Declutter contacted Hougan with further questions but did not immediately receive a response.