Companies with crypto reserves are outperforming Bitcoin
Companies building cryptocurrency reserves, known as Digital Asset Treasury (DAT) firms, have become some of the best-performing crypto-related stocks since the start of the current bull trend. Since mid-August, the combined market capitalization of publicly traded DAT companies has risen by about 10% and now stands at roughly $340 billion.
According to The Block, this is still well below the peak of around $490 billion recorded in October and November last year, when Bitcoin reached an all-time high near $126,000.
Performance varies significantly between individual companies. Shares of major players Strategy and BitMine have gained about 30% and 27%, respectively, broadly tracking the appreciation of Bitcoin and Ethereum. Since August 17, Strategy has outperformed BTC by roughly 10%.
Less prominent DAT companies focused on altcoins have delivered even stronger returns. CYPH and PURR are exposed to Zcash and Hyperliquid, respectively. Over the period, HYPE gained about 36%, while ZEC rose 56%. Meanwhile, PURR shares climbed 62%, and CYPH surged 142%.
How DAT companies work
The business model of crypto treasury companies is based on buying and holding digital assets. They raise capital, including by issuing shares at a premium to the value of their crypto reserves, and then use the proceeds to purchase more tokens. Investors are attracted by the opportunity to gain amplified exposure to the growth of the underlying asset.
The DAT model is gradually becoming more sophisticated and is no longer limited to simply holding cryptocurrencies. Companies with Ethereum reserves can stake ETH and help secure the network. PURR operates a Hyperliquid validator and participates in governance voting, while CYPH mines Zcash and contributes computing power to the network.
Strategy has far fewer such opportunities because Bitcoin itself does not generate yield through staking or similar mechanisms. As a result, DAT companies working with other blockchains can create additional value by participating directly in their ecosystems.
Growing investor interest in these companies can also create a financial flywheel. When their shares trade at a premium to the net asset value of their crypto holdings, the company can issue additional stock and use the proceeds to buy more tokens. Under favorable conditions, this increases the amount of cryptocurrency held per share and supports further business growth.
Strategy set the trend for crypto reserves
For years, Strategy was the main benchmark for companies building cryptocurrency reserves. In 2020, Michael Saylor's company became the first major publicly traded company to make Bitcoin the centerpiece of its treasury strategy. Instead of keeping excess cash mainly in dollars and bonds, it began regularly buying BTC and later started raising additional capital through stock and debt offerings to finance further purchases.
The model quickly turned Strategy into a stock-market proxy for a leveraged bet on Bitcoin. Investors bought its shares as a way to gain exposure to BTC through traditional markets, with the stock often moving more sharply than the cryptocurrency itself. Strategy's success inspired a wave of imitators, but companies are now increasingly applying the same approach not only to Bitcoin but also to other cryptocurrencies.
Earlier, Strategy analysts accused MSCI of trying to push Bitcoin-focused companies out of major indexes.
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