Digital Asset Vault Company: A New Realm for Crypto Assets Investment

The cryptocurrency investment market is welcoming an emerging sector - Digital Asset Treasury companies (referred to as DATs). These companies provide investment opportunities in digital assets through permanent capital instruments listed on public stock exchanges. After in-depth research, we believe that this investment strategy has tremendous potential and deserves significant attention.

As investors, we always maintain an open attitude and continuously challenge our inherent beliefs. Given the persistent premiums associated with certain digital asset-related stocks, as well as the buying behavior of some fundamentally-oriented funds, we believe that the DAT trend embodies asymmetric investment opportunities. Although the premium may not last forever, there is a reasonable basis for investing in digital asset treasury companies and explaining their trading prices being higher than the underlying net asset value (NAV).

The most basic bullish argument is that, through certain DAT companies, over time, investors may hold more Bitcoin per share (BTC-per-share, abbreviated as "BPS"). Here's a simple example:

Assuming that the stock of DAT Company is purchased at twice the net asset value, it is equivalent to buying 0.5 BTC instead of directly purchasing 1.0 BTC. However, if the company can successfully raise funds and BPS grows by 50% each year (it grew by 74% last year), then by the end of the second year, the actual amount of BTC owned by the investor will reach 1.1, exceeding the amount purchased directly on the spot.

To believe that DAT company can continuously improve BPS, you need to believe in the following three points:

1. Stocks do not always trade at fair value; the market may exhibit irrational pricing, leading to valuations that are excessively high relative to the net asset value.

2. The high volatility of DAT company's stock has created opportunities for issuing convertible bonds or selling call options, thereby obtaining high premiums.

3. The management possesses sufficient financial wisdom to fully leverage these market conditions.

The success of DAT also stems from their connection of traditional investor behavior with digital asset investment, essentially transforming Crypto Assets into stocks. The strong demand for certain DAT companies, ETFs, and the new wave of DAT products indicates that a significant amount of capital had previously been marginalized due to the entry barriers of native Crypto Assets products. It is reassuring that more capital is now entering the field in this manner.

From a structural supply perspective, there is an interesting comparison between DAT and ETF: purchasing DAT actually locks the supply, as they are essentially one-way closed-end funds, with lower likelihood of selling. In contrast, the tokens held by ETFs may easily dissipate like accumulation. This characteristic may have a better impact on the price of the underlying asset, as DAT can both purchase more tokens as reserves and not encourage sell-offs.

Currently, there are multiple DAT companies in the market focusing on different Crypto Assets, including Bitcoin, Solana, and Ethereum. These companies adopt similar strategies but target different Crypto Assets, each with its unique advantages. For example, Solana has the following advantages as an alternative to BTC:

a) Due to the shorter maturity period, the potential for price increase may be greater; b) Volatility is higher than BTC, which is beneficial for achieving higher returns; c) Staking rewards can promote the growth of each share of SOL; d) Currently, there are fewer available alternatives, and there is a greater undeveloped demand.

As more and more DAT companies succeed in the market, this field is attracting more attention and investment. In the future, we expect to see more innovative projects and investment opportunities emerge.