Bitwise CIO: Only 'Hard' Digital Asset Trusts Deserve Market Premiums

The crypto market is undergoing a significant revaluation of Digital Asset Trusts (DATs), evidenced by a dramatic collapse in market net asset value (mNAV) premiums. Data indicates that these premiums, which once stood at over 25, have now converged sharply toward parity (1.0). This movement signals a loss of investor confidence in simply holding crypto through corporate structures.

Matt Hougan, Chief Investment Officer for Bitwise, has weighed in on the trend, arguing that this shake-up is necessary. He contends that only firms executing complex, value-adding strategies—which he terms “Hard” DATs—deserve to trade at a premium, while companies adopting passive approaches are destined for discounts.

The Litmus Test: Distinguishing Passive vs. Complex Models

Hougan challenges the perceived uniqueness of simple “buy-and-hold” crypto firms. With the proliferation of new, efficient financial tools, basic accumulation is no longer a premium-worthy strategy. He stated that the bar for entry has lowered significantly: “Buying a crypto asset and putting it on a balance sheet today isn’t hard.”

The Bitwise executive suggests that DATs that pursue the “lazy approach” of mere asset holding will likely see their stock trade at a discount to the value of their underlying crypto assets. To justify a premium in this new, competitive landscape, DATs must integrate sophisticated financial engineering and active strategies around their holdings.

The MicroStrategy Blueprint for Justified Premiums

Hougan holds up MicroStrategy (now Strategy) as the leading example of a “Hard” DAT. The firm’s strategy of accumulating Bitcoin (BTC) by successfully issuing debt instruments, such as convertible notes, against its position is considered a high-value, complex operation. The ability to use corporate financing tools to increase their treasury in this manner gives the company a structural advantage that can justify its premium valuation.

Other complex strategies that may warrant a premium include responsibly engaging in decentralized finance (DeFi), smart lending, or writing covered calls. As the market matures, Hougan concludes that “Good companies get rewarded for doing hard things well over time. Bad companies that execute poorly or try to take the easy route to riches get punished.”