Opinion: Mike Maloney, Chairman, Digital Asset Infrastructure and Financial Strategy Company 21 Vault
Digital Asset Treasury (DAT) began in 2020 with Strategic’s decision to buy and hold Bitcoin (BTC). This fateful decision created a Treasury with a market capitalization of more than $80 billion.
Many companies have begun replicating this buy-and-hold approach. These new DATs will raise large amounts of capital to purchase selected assets before merging with publicly traded companies, offering investors exposure to cryptocurrencies through equity.
Summer has turned into winter. In certain market conditions, a pure buy-and-hold approach may underperform shareholder expectations. Worse, these efforts miss a huge opportunity for DAT to serve as a core source of patient funding that cryptocurrencies desperately need.
Doing nothing with cryptocurrencies on your balance sheet is not a strategy
The success of Strategy’s Bitcoin accumulation model prompted the launch of more and more DATs, but DAT was unable to adopt Saylor’s capital markets strategy and simply continued to maintain DAT. This is the wrong approach, exposing balance sheets to currency and operational risks rather than building a strategy that generates a return on investment (ROI) for shareholders.
DAT should not bet on the future based on one assumption: that the price of Bitcoin or other cryptocurrencies will always rise. It’s not financial management. It uses speculation. These companies will remain vulnerable to both market drawdowns and regulatory classification as investment companies, potentially increasing compliance and classification risks in some jurisdictions.
Meanwhile, their crypto holdings sit idle and do nothing to enhance liquidity, stability, or adoption in the broader ecosystem. None of these DATs are re-injecting capital into the ecosystem or technology that sustains their assets. They do not support Bitcoin’s financial infrastructure, improve Lightning’s liquidity, or fund developments that strengthen the network.
Corporate ownership itself has no value. It can also be done by individuals. Companies need a strategy, and that strategy must serve both investors and the communities on which the company depends.
DAT 2.0 approach leverages crypto to support the ecosystem
Although you can’t bet on the price of cryptocurrencies rising, you can bet on their adoption in emerging economies. An effective DAT strategy includes leveraging cryptocurrencies for strategies and businesses that strengthen and protect the ecosystem. In the case of Bitcoin, this includes investing in the mining, storage, payments, lending, and liquidity infrastructure that supports the Bitcoin ecosystem.
Rather than relying on the ever-increasing rise of the Bitcoin price, DATs 2.0 will spread their investment across projects that will ultimately contribute to the continued growth and longevity of the Bitcoin network, thus increasing the likelihood that the price will actually rise. Remember that, at its core, Bitcoin is a proof-of-work system.
This will allow DAT 2.0 to fulfill the role that banks have played for 140 years in TradFi: as a fundamental source of “slow capital.”
DAT can cause lagging capital
TradFi can rely on trillions of dollars of patient, permanent capital backing Chase, JPMorgan, Goldman Sachs, and other pillars of the economy. If cryptocurrencies are to move beyond alternative asset classes, they also need a core of patient, slow-moving capital to support the entire ecosystem. DAT is that opportunity. Not venture capital or hedge funds.
connection: Cryptocurrency government bond purchases outnumber Bitcoin supply by 3 to 1
There are multiple reasons why venture capitalists and hedge funds are ill-suited to this important role. Hedge funds need to maintain an ROI of 10-15%. Otherwise, investors will exit. Venture capital typically requires a five-year public offering event that eliminates capital, even for companies with the most long-term horizons. Retail investors are not motivated by low-risk, low-yield opportunities. It’s just not in our wheelhouse. This is a fourth type of capital that the crypto industry has never seen before.
DAT 2.0 could act like a long-term ecosystem financier, deploying investment capital to support the broader ecosystem of cryptocurrencies that DAT 1.0 previously only bought and held.
This represents one potential long-term strategy for DAT and the broader crypto ecosystem.
Opinion: Mike Maloney, 21 Vault Chairman.
This opinion article represents the views of the contributing experts and may not reflect the views of Cointelegraph.com. This content undergoes editorial review to ensure clarity and relevance, and Cointelegraph remains committed to transparent reporting and upholding the highest standards of journalism. We encourage our readers to conduct their own investigation before taking any action related to our company.
This opinion article represents the views of the contributing experts and may not reflect the views of Cointelegraph.com. This content undergoes editorial review to ensure clarity and relevance, and Cointelegraph remains committed to transparent reporting and upholding the highest standards of journalism. We encourage our readers to conduct their own investigation before taking any action related to our company.
