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I regret to inform you that there may come a time when digital asset treasuries will undertake leverage to sustain mNAV premiums. Thank you for your attention to this matter!

DATs leverage

All digital asset treasury (DAT) companies seem to be doing something boring and identical on the surface: sell stock, raise money, buy crypto assets, repeat.

In practice though, the astute investor can determine which DATs will succeed, trade at a mNAV premium or fade into obscurity.

Some drivers are obvious, like charismatic leadership with a “Saylor effect.” But it also includes less obvious factors like geographic jurisdiction. 

For instance, a recent Caladan report argues that the poor performance of many Bitcoin DATs is tied to their equity listing venue.

DATs listed in North America or Singapore can enjoy elevated premiums as high as 5.0x, whereas those listed in Hong Kong or China (such as the aptly-named SOS Limited) trade at severely depressed NAV premiums — as low as 0.20x for reasons of “regulatory uncertainty, legal risk and capital control fears.”

Then there are also idiosyncratic regulatory factors. MetaPlanet’s success, for example, is largely thanks to Japan’s tax code, where crypto gains are taxed up to 55% vs. a flat 20% on stock gains.

DAT’s brand differentiation is drastically expanded if you consider SOL and ETH treasuries. That’s where things start to get interesting (and risky).

I wrote last week that the Solana digital asset treasury (DAT) company Forward Industries is unique for its plans to use DeFi.

Yesterday, the company announced it will tokenize its FORD shares on Solana via Superstate, a regulatory-compliant equity tokenization platform. Tokenized FORD is intended to be posted as collateral on Drift, Kamino and Jupiter Lend, per its press release.

(FORD is the second Nasdaq-listed equity to be tokenized on Solana, following Galaxy earlier this month.)

This seems like an obvious thing for DATs to do, assuming you can get your board of investors behind it. It makes DATs more attractive on several fronts:

• From the DAT’s perspective, your treasury holdings now earn an organic yield (this is not the same “yield” that Bitcoin DATs refer to), which supports additional capital raises.

• From the retail stockholder’s perspective, that means opening your FORD stock up to yield opportunities, as opposed to it sitting idle in your Robinhood account.

All of this greatly increases the attractiveness of the stock, and gives markets a reason as to why the stock “should” trade a mNAV premium to its underlying asset holdings.

As far as I can tell, there are only two other DATs planning to do the same: ETHZilla, which wants to deploy $100 million of ETH into EtherFi’s liquid restaking, and Brera Holdings, which intends to run a validator to earn SOL rewards.

Most other DATs aren’t farming a yield with their treasuries, perhaps for obvious reasons.

DeFi introduces smart contract exposure, which means the lending protocol you’re deploying into could suffer a hack. 

DATs would also be exposed to liquidity and oracle risks that would leave your stock open to arbitrage and downstream reputational consequences. That’s likely why tokenized FORD is permissioned behind a KYC.

Whether or not these risk reward ratios are worthwhile is contextual and up for debate.

I wouldn’t lose sleep over my exposure to Bitmine Immersion, if Tom Lee was, say, staking ETH in a battle-tested protocol like Lido for a nominal 4% yield.

I would be pretty worried on the other hand if Lee was running a leveraged looping strategy for 40% yield through three different protocols.

The incremental yield probably isn’t worth the marginal risk.

The DAT trend doesn’t seem to be slowing down, but I wouldn’t be surprised to see DATS pursuing strategies that push further along the risk curve. DATs aren’t leveraged — yet. They may soon be.

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Katana was built by answering a core question: What if a chain contributed revenue back into the ecosystem to drive growth and yield?

We direct revenue back to DeFi participants for consistently higher yields.

Katana is pioneering concepts like Productive TVL (the portion of assets are actually doing work), Chain Owned Liquidity (permanent liquidity owned by Katana to maintain stability), and VaultBridge (putting bridged assets to work generating extra yield for active participants).

Solana lending markets:

The collective TVL on Solana’s lending protocols has shot up since early August to a record high of $4.2 billion today. This is due to Jupiter’s new lending product, which has amassed $736 million in TVL.

Notably, Jupiter Lend’s ascent does not come at Kamino’s expense. Kamino’s TVL has continued to climb from $2.5 billion to $3 billion over the same time. This suggests that the TAM for Solana lending has increased due to Jupiter’s launch, rather than it being a zero-sum reallocation of deposits.

Crypto is changing TradFi derivatives and rate markets as we know them.

DAS: London will feature all the builders driving this change. 

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📅 October 13-15 | London