In-depth Research Report on Digital Asset Treasury (DAT): A New Financial Paradigm from On-Chain Asset Accumulation to the Equity Flywheel

I. Overview of the DAT Market

In recent years, Digital Asset Treasuries (DATs) have emerged as a novel phenomenon at the intersection of the capital and crypto markets. The core logic is to raise funds through public equity financing instruments, such as listed company shares, convertible bonds, at-the-market (ATM) offerings, and private investment in public equity (PIPE), and allocate mainstream crypto assets like Bitcoin and Ethereum on the balance sheet. Then, returns are generated for shareholders through operations and yield management. Essentially, it is a model of purchasing on-chain assets through equity financing, allowing traditional secondary market investors to gain access to leveraged, structured, and tradable crypto assets in the form of shares. This mechanism not only bridges the gap between on-chain and traditional finance but also creates new trading logics and investment narratives in the market.

DATs differ markedly from ETFs across several dimensions. To begin with, liquidity pathways are different. ETFs rely on a complex subscription-redemption mechanism involving authorized participants and market makers, with settlements typically taking one to two days. By contrast, DAT shares can trade instantly in secondary markets, offering efficiency much closer to the circulation characteristics of on-chain assets. Second, pricing methods are different. ETFs are often anchored to net asset value (NAV), keeping volatility relatively limited and making them more suitable for long-term allocation. However, DAT shares are driven by market value (MV), with greater price elasticity and higher volatility. Therefore, hedge funds and arbitrage institutions can adopt structured strategies by exploiting premiums and discounts. Third, leverage structures are distinct. ETFs generally lack room for leverage at the fund level, whereas DAT companies can layer leverage through tools such as convertible bonds, ATM offerings, and PIPE financing to expand their balance sheets and amplify excess returns during bull cycles. Finally, there is discount protection. Premiums and discounts in ETFs are quickly corrected by arbitrage mechanisms, while DAT shares trading below the net value of their treasury effectively allow investors to buy the underlying crypto assets at a discount, creating a theoretical buffer against downside. However, this protection is not foolproof. If the discount stems from forced deleveraging and the company sells off underlying assets to repurchase shares, it could instead exacerbate downward pressure.

Since 2025, DATs have accelerated their development around Ethereum, emerging as a focal point of market attention. BioNexus was the first to announce an ETH treasury strategy, marking the start of corporate-scale ETH holdings. BitMine (BMNR) disclosed in August that it held 1,523,373 ETH, making it the world's largest Ethereum treasury with a market capitalization in billions of dollars. By continually expanding its ETH position through frequent ATM financing, SharpLink (SBET) now holds more than 800,000 coins, nearly all of which are staked, directly converting Ethereum's productive asset nature into cash flow. Through these equity market financing activities, such companies have funneled traditional investors' capital into crypto, further driving the institutionalization and financialization of Ethereum's price. At the same time, activity on decentralized exchanges reflects the liquidity characteristics of this new mechanism. In August 2025, daily spot trading volume on the DEX platform, Hyperliquid, briefly surpassed Coinbase, underscoring how capital now races across on-chain trading, equity markets, and derivatives markets, with DATs serving as a key nexus for this cross-market capital flow. Some companies have even introduced innovative approaches to shareholder incentives. For instance, BTCS announced ETH dividends and loyalty rewards to attract long-term investors, which strengthens market stickiness while countering stock lending and short selling.

However, DATs also come with risks that cannot be overlooked. Their model relies on a premium flywheel during bull markets: rising share prices enable additional share issuance, new funds raised are used to buy more crypto assets, and asset appreciation further pushes up mNAV, which in turn fuels further share price hikes. This cycle can deliver extraordinary returns in an uptrend, but it may amplify risks in bear markets. When mNAV flips from premium to discount and investors lose confidence in management, companies often resort to selling underlying assets to repurchase shares in an attempt to stabilize valuations, thus triggering a negative feedback loop. If multiple DATs simultaneously trade at discounts and adopt similar measures, the market may face systemic risks. Leverage poses another critical concern. DAT companies frequently layer leverage through convertible bonds, short-term financing, and equity issuance. In upswings, this amplifies gains, while in downswings, it can trigger margin calls or even forced liquidations. Once on-chain asset prices plummet, concentrated sell-offs could shock the market. This risk is especially pronounced where assets like Ethereum are heavily concentrated.

Market research has outlined potential scenarios. In the baseline case, companies gradually adjust their positions via OTC transactions, placing only limited downward pressure on ETH prices. In a severe case, if 20–30% of Ethereum treasury holdings were offloaded within weeks, prices could drop to $2,500–$3,000. In an extreme case, if regulation tightens or funding chains break, more than 50% of holdings could be forcibly liquidated, potentially bringing ETH down to $1,800–$2,200. Although such an extreme case is unlikely, its potential impact should not be underestimated. It is worth noting that DAT executive compensation is often closely tied to stock prices. As a result, when faced with stock price discounts, executives are incentivized to pursue short-term measures such as selling cryptos to repurchase shares and boost market valuations rather than sticking to long-term holding strategies. This mismatch between governance and incentives makes DATs more prone to procyclical risk amplification under stress.

Even so, DATs still have a promising future. Over the next three to five years, they are likely to evolve in parallel with ETFs, forming a complementary pattern. ETFs provide stable β exposure, making them suitable for passive investors. Meanwhile, DATs offer higher elasticity and financially engineered return opportunities, catering more to hedge funds, family offices, and institutional investors seeking excessive returns. More importantly, the DAT model is expanding from Bitcoin and Ethereum to high-quality altcoins, offering some projects a capital market channel akin to an "IPO moment" and advancing the institutionalization of the crypto industry. The long-term sustainability of DATs will hinge on gradual clarification of regulatory frameworks, improved information disclosure mechanisms, and more diverse shareholder incentive tools. Overall, DATs represent a vital experiment in bridging capital and crypto markets. They could become a milestone in the evolution of next-generation institutional financial instruments or an amplifier of market volatility due to their procyclical characteristics. For investors, the core challenge in the coming era of crypto finance may be to make rational use of the complementarity between ETFs and DATs while flexibly adjusting strategies between mNAV premiums and discounts.

II. Industry Development and Milestones

In 2025, the most striking development in the evolution of the DAT market has been the concentrated breakout on the Ethereum front. Unlike the earlier reserve logic centered on Bitcoin, Ethereum is gradually emerging as a leading role in corporate treasuries. In March, BioNexus became the first to announce its Ethereum treasury strategy, formally incorporating ETH into its balance sheet and expanding its holdings through equity financing. This move was seen as a landmark event that signaled the start of the era of corporate ETH holdings. Unlike Coinbase and other exchanges, which hold ETH primarily for operational needs, BioNexus directly positioned Ethereum as a strategic reserve asset, sending a clear signal of institutional adoption to the market. This not only boosted the company's visibility in capital markets but also led investors to view Ethereum as a reserve asset as important as Bitcoin. Later, the trend was pushed to new heights when BitMine (BMNR) made a strategic move. The company disclosed in August that its ETH holdings had reached 1.52 million coins, with a market cap exceeding $6 billion and accounting for about 1.3% of Ethereum's circulating supply. This scale quickly established BitMine as the "Ethereum version of MicroStrategy", giving it enormous influence across the dual narratives of capital and on-chain markets. BMNR's model closely resembles MicroStrategy's: continuously expanding its balance sheet via convertible bonds and equity financing, creating a flywheel of "financing–buying coins–pushing up valuations–refinancing", fostering a cycle where its stock price and its on-chain assets reinforce each other. Market views on BMNR have been polarized: On the one hand, BMNR is a milestone in Ethereum's path to institutionalization. On the other hand, concerns have been raised that its high leverage and concentrated holdings could magnify systemic risks in case of a market reversal. But either way, BMNR has become one of the most closely watched DATs of 2025 and has directly reshaped the ETH's capital landscape.

In parallel, SharpLink (SBET) has adopted a higher-frequency, more aggressive approach to balance sheet expansion. Using an ATM financing mechanism, SBET has continued to issue new shares in the secondary market, disclosing additional financing and purchase scales almost weekly. By the end of August, the company had accumulated over 800,000 ETH, nearly all of which was staked on-chain. This strategy directly converts Ethereum's productive asset nature into cash flow, allowing the company to generate not only floating PnL on its balance sheet but also tangible returns. SBET's model has attracted considerable attention. While its weekly disclosures and high transparency have bolstered investor confidence, its strategy has become easier for the market to quantify, track, and trade against. Critics argue that this "full staking" strategy increases exposure to on-chain protocol security and liquidity risks, but supporters contend that turning ETH into a productive asset in this way could be the best practice for DAT.

It should be noted that BTCS has showcased a different kind of innovation in this round of competition. The company has introduced a scheme combining "ETH dividends + loyalty rewards". In other words, it distributes dividends in ETH while also including loyalty clauses that encourage shareholders to transfer their stock to a designated transfer agent and hold it through early 2026. In this way, investors not only receive both cash and ETH dividends but also enjoy extra incentives for long-term holding. This approach enhances shareholder stickiness and curbs stock lending for short selling to some extent, thereby stabilizing market sentiment. Although some are skeptical about the sustainability of "ETH-based dividends", this move clearly demonstrates the flexibility and creativity of DATs in financial engineering and highlights the differentiated strategies companies are adopting to cope with share-price discount risks.

At the same time, changes on the trading front also deserve attention. In August 2025, the decentralized exchange Hyperliquid briefly surpassed Coinbase in daily spot trading volume, marking a highly symbolic event. For years, CEXs were regarded as the core of crypto asset liquidity. However, with the emergence of DAT stock financing and the deepening interaction between on-chain capital and equity markets via DEXs, the liquidity landscape is being redefined. Hyperliquid's overtaking of Coinbase in trading volume is not an isolated incident. Instead, it signals the gradual integration between capital markets and on-chain trading. A new cycle is taking shape as funds flow through "DAT equity financing – companies purchasing on-chain assets – staking/re-staking to generate yield – investors engaging in arbitrage and trading". This cycle not only expedites the integration of on-chain and traditional markets but may also amplify liquidity shocks under market stress.

On the whole, the evolution of the DAT market in 2025 reveals the prototype of a nascent new ecosystem. BioNexus opened the door to ETH treasury strategies; BitMine established itself as an industry leader through large-scale holdings; SharpLink explored an alternative path with high-frequency financing and its full-staking model; and BTCS pioneered unique shareholder incentive tools through financial engineering. At the same time, fluctuations in Hyperliquid's trading volumes mirrored a reconfiguration of liquidity between capital and on-chain markets. These cases demonstrate that DATs are no longer merely a "corporate crypto purchase" model but have already evolved into a comprehensive financial innovation encompassing financing methods, asset allocation, yield management, shareholder governance, and other dimensions. This ecosystem will continue to expand and evolve in the future. It may serve as an accelerator for the institutionalization of crypto assets or become an amplifier of market volatility due to mismatches between leverage and liquidity. Whatever the outcome, DATs have already profoundly reshaped the capital-market narrative around crypto assets in 2025 and become a focal point for global financial observers.

III. Risks and Potential of DATs

As the DAT model grows at breakneck speed, the risks and systemic vulnerabilities behind it are becoming increasingly evident. On the surface, digital asset treasuries appear to provide fresh sources of funding and liquidity support for the market. However, a closer look reveals that their operating mechanisms are strongly pro-cyclical. They can not only magnify gains in bull markets but also intensify declines in bear markets. This is like a double-edged sword, making DATs' role in capital and crypto markets especially sensitive and complex. The first issue is leverage risk. The balance-sheet expansion logic of DATs typically relies on equity issuance and convertible bond financing. In bull markets, as stock prices and market cap rise, companies can raise large sums of funds at relatively low cost, which they then use to increase Bitcoin or Ethereum holdings, creating a flywheel effect between valuation and position. However, once the market turns, this leverage model can quickly backfire. If the underlying asset prices correct sharply, debt repayments and margin clauses may be triggered, forcing companies into liquidations to cover funding shortfalls. Leverage magnifies returns as well as risks, which is especially perilous given the high volatility characteristic of crypto assets.

The second issue is discount risk. DAT valuations are anchored to the so-called mNAV, i.e., the ratio of a company's market cap to the fair value of the crypto assets in its treasury. In bull markets, mNAV is often well above 1, as investors are willing to pay a premium for companies' future expansion and earnings. However, once market sentiment reverses and the stock prices fall below net asset value, mNAV flips from premium to discount, quickly eroding investor confidence in management. In such cases, to repair valuations and stabilize the market, companies often sell their ETH or BTC holdings to repurchase shares, aiming to pull stock prices back toward their net asset value. Yet this approach essentially sacrifices the long-term holdings for short-term stock price repair. The discount may narrow temporarily, but the market has to face additional selling pressure as a result, creating a vicious cycle.

Liquidity shocks are another major concern. As DATs' crypto asset holdings grow larger, any concentrated liquidation could drastically impact the market. In particular, when decentralized exchanges are illiquid, coordinated selling by multiple DATs could trigger a waterfall decline in the market. Historical precedent shows that when highly concentrated assets undergo forced deleveraging, price drops often follow nonlinear patterns. In other words, even if a tiny fraction of the circulating market cap is sold off, inadequate liquidity absorption may still trigger sharp fluctuations. This risk is especially acute for tokens like Ethereum, where holdings are highly concentrated. Moreover, regulatory uncertainty hangs like a sword over the DAT model. No unified standards have been formulated for treasury-style companies on matters such as accounting treatment, information disclosure, leverage ratios, or retail investor protection. Different stances across jurisdictions could at any moment reshape the operating environment for DATs. For example, regulators may require companies to disclose on-chain addresses and staking risks, impose limits on leverage ratios, or prohibit dividend distributions in the form of tokens. All these measures could significantly constrain DATs' financing capacity and alter their market narrative. For DATs that rely heavily on capital market financing and investor confidence, such regulatory shifts not only mean higher costs but could also directly threaten the sustainability of their model.

In addition, the mismatch between governance structures and incentive mechanisms is another potential issue within the DAT model. In most DATs, executive compensation is directly tied to stock prices. While this alignment can motivate balance sheet expansion in bull markets, it can also prompt management to adopt short-termist behavior in bear markets. When stock prices trade at a discount and investor confidence wanes, executives may opt to sell underlying assets to repurchase shares, boost market capitalization, and safeguard their own pay, rather than stick to a long-term holding strategy. Such incentive misalignment not only undermines the strategic stability of DATs but also increases the likelihood of pro-cyclical sell-offs, further exacerbating market fragility. Apart from risk analysis, scenario simulations offer a more intuitive view. In a baseline scenario, with a moderate pullback in ETH prices, DAT companies might gradually offload holdings via OTC transactions to mitigate market impact and contain price shocks. However, in a severe scenario, if 20%–30% of ETH treasury holdings were sold off in a short period, markets might not be able to fully absorb the shock, and ETH prices could fall into the $2,500–$3,000 range. This would represent a roughly 30% decline from current levels, enough to reshape market sentiment. In an extreme scenario, if more than 50% of holdings were forcibly liquidated due to funding shortages, regulatory tightening, or systemic crises, ETH prices could plunge to $1,800–$2,200. Such a collapse would erase all the gains registered since the DAT wave began, dragging the market back to early-2025 levels. While extreme scenarios are unlikely to happen, they may have profound market influence once triggered, as DATS depend heavily on financing and leverage. Overall, the rise of DATs has undeniably injected fresh narratives and liquidity into the crypto market, but they are far from a stable "new normal". Their pro-cyclical nature makes them both amplifiers of bull markets and sources of risk in bear markets. For investors, understanding the leverage chain, the premium-discount dynamics of mNAV, and the incentive structures of management under the DAT model is key to assessing its sustainability. Without well-functioning regulation and effective risk isolation, DATs resemble a high-leverage financial experiment, one that could accelerate the institutionalization of crypto assets and might easily ignite market turmoil. Over the coming years, DATs' risk management capacity and the maturity of their regulatory frameworks will determine whether this model can truly evolve from a speculative narrative into a robust financial instrument.

Over the next three to five years, DATs are likely to evolve in tandem with ETFs, jointly shaping the institutional investment landscape of the crypto market. ETFs have already proven their strengths in compliance, stability, and low cost. They can offer steady β exposure to passive investors, pension funds, and sovereign wealth funds. By contrast, DATs, characterized by greater flexibility, more complex capital engineering, and direct on-chain asset holdings, are naturally better suited for hedge funds, family offices, and active institutions seeking excess returns. This division of labor in market structures suggests that ETFs and DATs are not locked in zero-sum competition but rather complement each other in a collaborative effort to drive deeper integration between traditional capital and crypto markets. From the perspective of asset expansion, DAT investments may no longer be confined to BTC and ETH. As the industry ecosystem matures, high-quality altcoin projects may experience their own "IPO moments" through DATs, using listed-company treasury financing to build large early-stage on-chain positions. This would not only provide institutional endorsements for the tokens involved but also create entirely new narratives for capital markets. For example, Layer 2, decentralized data networks, or stablecoin-related core protocols could all emerge as future DAT allocation targets. Should this trend materialize, DATs would no longer function solely as leveraged vehicles for BTC and ETH but would also become accelerators for the next generation of public blockchains and protocols, exerting a profound impact on the landscape of crypto ecosystems.

In terms of operating models, yield engineering will become the next key focus for DATs. Some companies have already begun experimenting with staking their token holdings to earn on-chain interest, converting that income into cash flow for shareholders. Going forward, this model may diversify into options hedging, basis arbitrage, restaking, and governance participation, among other strategies. Unlike traditional ETFs that merely track prices, DATs can create a "dynamic treasury" through active operations to generate on-chain income and strengthen their influence over the underlying ecosystem. This means DATs are not just asset holders; they can also become key governance participants in on-chain protocols and potentially evolve into "institutional players" in the crypto economy. A gradually clearer regulatory framework will be a critical factor for the sustainable growth of DATs. For now, jurisdictions remain divided in their stance toward DATs, with unresolved issues such as information disclosures, accounting standards, leverage limits, and retail investor protections. However, as market size expands and the investor base grows, regulatory pressure will inevitably mount. In the future, DATs may be required to disclose their on-chain addresses, detail their holdings and staking ratios, and even standardize dividend distribution models to ensure transparency and protect investors. In certain senses, this would enhance DATs' compliance and credibility, making them more attractive to institutional investors. Meanwhile, it could also reduce the flexibility of their capital engineering. Stricter regulation is thus both a challenge and an essential step for DATs to evolve from "financial experiments" into "institutionalized instruments".

Over the long term, DATs have the potential to develop into quasi-financial intermediaries in the crypto market. Their uniqueness lies in their ability to connect equity capital markets with on-chain asset markets, creating a bridge for cross-market fund allocation. When investors buy DAT shares, they indirectly participate in the holding and operations of on-chain assets. Meanwhile, DAT companies introduce traditional capital into the crypto space through equity financing. This two-way interaction allows DATs to play an increasingly important role in global capital flows and asset allocation. In particular, in contexts where cross-border capital cannot directly invest in crypto assets, DATs could serve as one of the compliant channels, offering "indirect exposure" and thereby broadening the investor base for crypto assets. However, this seemingly bright prospect comes with systemic risks that must not be overlooked. The pro-cyclical nature of DATs means they may act as accelerators that drive up prices in bull markets but may also exacerbate downturns in bear markets. Unlike ETFs with passive holdings, DATs rely heavily on equity financing and the maintenance of mNAV premiums. Once market conditions reverse, their financing chain can break down quickly, triggering large-scale forced deleveraging. In other words, while DATs hold vast potential, whether they can truly mature into a robust institutional segment will depend on how they perform in risk management and adapt to regulatory requirements.

To sum up, we'll see two parallel paths for DAT development in the next three to five years. On the one hand, they will continue to innovate, expanding their asset coverage, embedding yield engineering, and increasing on-chain participation, to gradually build a distinct competitive edge and become highly elastic complements to ETFs. On the other hand, they will need to withstand real-world tests from regulatory constraints, leverage controls, and market fluctuations. In doing so, they will explore more stable and sustainable models. DATs are both a symbol of the integration between capital and crypto markets and an epitome of pro-cyclical risk. Only by striking a balance between institutionalization and innovation can they truly become a new class of intermediary in the global financial system, bringing crypto assets from the periphery into the mainstream.

IV. Conclusion

The rise of DATs is without doubt one of the most defining events of 2025 for both capital markets and the crypto industry. More than just a new asset allocation tool, DATs are an institutionalized experiment that combines equity financing with on-chain assets, representing a deep coupling of these two major financial systems. At their core, DATs directly tie the financing capacity of listed companies with the high volatility of blockchain assets, creating an unprecedented investment logic and market narrative. For investors, they not only open up new channels to increase returns but also introduce hidden vulnerabilities that magnify risks. In bull markets, the operating logic of DATs works particularly well. Stock price premiums drive up mNAV, making it easier for companies to raise funds through convertible bonds, PIPEs, or ATM offerings. The funds raised are then used to buy crypto assets such as ETH and BTC. The expansion in the balance sheet in turn lifts market capitalization, creating a "premium–financing–accumulation" flywheel. This mechanism makes DATs powerful accelerators of market rallies, with market cap elasticity far exceeding that of traditional ETFs, turning them into targets sought after by hedge funds and high-net-worth investors. Within this narrative, DATs are not just products of financial innovation but core participants in capital flows and valuation expansion in bull markets.

In bear markets, however, the picture for DATs may be starkly different. As prices fall and mNAV shifts from premium to discount, market confidence in management weakens. To repair stock prices, companies may sell off underlying assets to repurchase shares in hopes of temporarily narrowing the discount. Yet such moves often intensify selling pressure, accelerate price declines, and drag more DATs into deleveraging traps at the same time. Under this procyclical mechanism, DATs are no longer stabilizers and may instead become amplifiers of systemic risk. In other words, DAT risk is not limited to individual companies; it lies in the potential impact on the entire crypto market exerted by multiple treasury-type companies dumping assets all at once. From an investment perspective, the functional distinction between DATs and ETFs is becoming increasingly clear. ETFs serve best as foundational tools for long-term allocation, offering transparent, low-cost, and predictable β exposure. By contrast, with their high leverage, high elasticity, and active yield management, DATs become incremental allocation vehicles, particularly suited for institutions and individuals pursuing excess returns and willing to take on risk. For family offices or actively managed funds, DATs provide capital engineering advantages that traditional ETFs cannot replicate, but at the cost of potential liquidity risks and governance uncertainties. Striking the right balance between ETFs and DATs will be a central task for investors in their future asset allocation strategies.

Over the next three to five years, DATs may evolve into an institutionalized sector on par with ETFs. Their development trajectory will primarily depend on three key factors. First, regulatory clarity. Only with unified standards for accounting treatment, information disclosure, leverage ratios, and shareholder protection can DATs attract broader inflows of institutional capital. Second, information transparency. Public disclosure of on-chain addresses, holdings, and collateralization ratios will be essential for investors to assess risk and valuation and will also serve as the foundation for building long-term trust in DATs. Third, market resilience. Whether the crypto market can remain resilient amid procyclical shocks will directly determine whether DATs act as a constructive force driving institutionalization or instead become a source of risk that amplifies volatility.

If these conditions are met, DATs may, like ETFs once did for index funds, mark another milestone in financial history. From initial market experiments to widespread adoption, they could redefine the boundary between capital and crypto markets, bringing crypto assets into larger-scale investment portfolios. However, if these conditions are unfulfilled, DATs may be nothing but a fleeting frenzy, viewed as "a high-stakes gamble of financial innovation against risk management" in history. The development trajectory of capital markets shows that every new tool brings not only efficiency gains and opportunities but also unknown risks. DATs are a product of this era, combining traditional financing logic with decentralized assets to create an entirely new method for value capture. However, their long-term success will depend not merely on market enthusiasm but also on rational regulation, robust governance, and mature risk-control mechanisms. Investors, companies, and regulators alike must be aware that DATs are not risk-free arbitrage instruments but rather a new challenge to the market structure as a whole. Eventually, the future of DATs will be shaped jointly by markets and institutions. If regulatory and market mechanisms can achieve positive interaction, DATs could become an important bridge for the institutionalization of crypto assets. Otherwise, they may exacerbate market turmoil due to their procyclical nature and leverage chains, leaving them as a failed case of "financial alchemy". Just as ETFs faced skepticism twenty years ago, but have since become cornerstones of global markets, the fate of DATs will likely be decided in the coming decade. Whatever the outcome, their emergence has already left an indelible mark on the long history of capital markets.