Crops that use stocks to accumulate financial financials for digital assets must trigger lessons from history on how compound risks spread through the financial system and dramatically elucidate them.
The growth model for digital asset financing firms (DATCOS), which currently accounts for more than $100 billion in digital assets, relies heavily on sustained equity premiums in net asset value (NAV), driven by the UP-only trajectory of cryptocurrencies like Bitcoin.
The fear of missing out on Bitcoin Treasury play presents an interesting parallel to the 1920s rush to mutual funds. This launched a new trust at a rate of once a day, making Goldman Sachs Trading Corporation the micro-tactics of the day.
The explicit pursuit of a business model for digital asset accumulation (usually Bitcoin) is a blueprint established by Michael Sayler's strategy (MSTR), which began accumulation of BTC in 2020. Other large participants to the Datco space are Metaplanet (3350.T) and Sharplink Gaming (SBET).
Galaxy said that if one or two companies are pursuing this route alone, it may not be that important to the broader ecosystem, but a week or so companies are currently focusing on the deal. These data are roughly correlated with both the underlying crypto assets markets built with each other. Galaxy said if redemption or buyback becomes widespread among businesses, it could be the beginning of a massive rewind.
“Now, the playbook is clear and capitalised. But this is part of the risk. If hundreds of companies are adopting the same one-way trade (growing stocks, buying crypto, repeating), there could be a slump in either of these three variables (investment sentiment, crypto prices, and lower liquidity in the capital market).”
Being caught up in a Datco transaction can put a huge downward pressure on the digital asset prices themselves. Just as inflows from finance companies acted as “sustainable bids” for Bitcoin, redemption-driven outflows can have the opposite effect. At the very least, net accumulation could cease, Galaxy said.
Datco's trends could still be in some way to reach Cressendo, but some companies' stocks have already begun to flirt with NAV discounts. In such cases, these companies may begin to use digital assets reserves or operating cash to start purchasing shares to arbitrate discounts. (Already, Bitmine has secured board approval to repurchase up to $1 billion worth of shares every time management thinks it is appropriate to do so.)
One of the results of Unowind is sector integration, Galaxy predicts. Larger, better capitalized players like Strategy (MSTR) are still trading at premiums and may start getting smaller DATCOs with NAV discounts. These transactions allow buyers to use their shares to acquire BTC at a discounted price. However, this only works as long as the acquirer holds the premium.
“As these companies continue to expand, their impact on the digital asset market will grow accordingly. Rewinding will weaken the strongest tailwind code.
“The rewinding of the Datco trade could blunt the public stock market's appetite for all types of digital asset exposures and slow the inflow into crypto ETFs.
