By Contributor,Jeff Gapusan,Michael Saylor

Copyright forbes

In August 2020, an enterprise business intelligence (BI) software company and dot-com darling pivoted its business model to focus on the acquisition of Bitcoin as its primary treasury reserve asset. This marked a significant rise in the company’s notoriety and the evolution of the term DATCO (Digital Asset Treasury Company). Strategy (fka MicroStrategy) has since become a household name in financial and crypto circles.

Michael Saylor, co-founder and executive chairman of Strategy Inc., navigated Strategy Inc.’s foray into Bitcoin in August 2020. Photographer: Ronda Churchill/Bloomberg
© 2025 Bloomberg Finance LP

Challenging traditional notions of treasury management, corporate treasuries were once relegated to managing cash, bonds, and other fiat-based assets. With the rise in popularity of digital assets, corporate treasuries are pondering their utility as part of or the core of their portfolios. This shift has given rise to a novel class of public companies known as Digital Asset Treasury Companies, or DATCOs, which have captured the imagination of the fintech world. In a Forbes article earlier this month, Coinfund President Chris Perkins declared the summer of 2025 as DAT summer to remember.

But as the hype swells, a crucial question remains: is the interest in these firms based on a sound, long-term strategy, or is it merely a speculative bet on asset appreciation?

Strategy’s Pivot To DATCO

Founded in 1989 by Michael Saylor, MicroStrategy was an early player in the business intelligence sector, providing software that used data analytics for business decision-making. The company went public in 1998, making Saylor the wealthiest man in the Washington D.C. area in early 2000.

MicroStrategy, once a dot-com bubble darling, recovered from early controversy to maintain a successful, if not mundane, software business. (Photo credit: CFOTO/Future Publishing via Getty Images)
CFOTO/Future Publishing via Getty Images

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The company’s fortunes reversed dramatically in March 2000 when it was forced to restate its financial results for the previous two years due to accounting errors. The stock plummeted by 62% in one day, leading to an SEC investigation and Saylor’s personal net worth dropping by billions.

After the dot-com crash, MicroStrategy spent two decades as a respected but largely unremarkable enterprise software company. The business successfully continued selling software, but faced increasing competition from larger players like Microsoft and Oracle. Saylor remained at the helm, but the company operated in relative obscurity compared to its bubble-era prominence.

In August 2020, Saylor led Strategy’s dramatic push into becoming a DATCO with the purchase of over 21,000 BTC for $250 million. As of September 15, 2025, the company owned almost 640,000 BTC valued at $47.2 billion. During that same period, Strategy’s market value has risen over 2,700% (92.0% annualized), capturing the imaginations of finance and financial technology people alike.

DATCOs now collectively hold over $100 billion in digital assets, led by publicly listed companies like Strategy (MSTR), Metaplanet (3350.T) and SharpLink Gaming (SBET).

The Search For Permanent Capital

For those unfamiliar with DATCOs, they can best be compared to permanent capital vehicles (PCV) like MLPs or REITs used in energy infrastructure and real estate investment. Like those structures, DATCOs offer investors a different, and in many ways more favorable, approach to investing in long-term, illiquid assets.

MLPs have been a key funding structure for investment in energy and infrastructure projects.

There are a number of reasons operating companies prefer permanent capital. For industries that require significant time to mature in order to generate value, permanent capital is seen as patient capital. Unlike traditional private equity or venture capital funds, which have a fixed lifespan (typically 7-10 years), PCVs are designed to be perpetual, or “evergreen,” giving issuers and companies to align their operations with the long-term growth of their underlying investments.

Structural Benefits Of Permanent Capital Vehicles

Permanent capital vehicles are a response to a desire for an investment structure that better aligns with the true nature of building long-term value, especially in private markets. They offer investors a way to access high-potential assets with a more stable, patient, and flexible approach.

These vehicles can provide investors with access to esoteric or illiquid private market assets like private equity, private credit, and real estate, which were once largely limited to institutional investors. While digital asset market access has become easier for a wider swath of investors, it can still be challenging to navigate the numerous offerings and ways in which they can be accessed.

Permanent capital can offer more flexibility with investor subscriptions and redemptions (e.g., quarterly or annual liquidity windows), which is a key advantage over traditional private funds where investors are typically locked in for the full duration.

For fund managers and operating executives, a stable, ongoing source of capital frees them from the constant cycle of fundraising, allowing them to focus on managing their businesses and investments and generating returns. This could make the vehicles more resilient to short-term market volatility. Managers can make decisions based on a long-term strategy rather than reacting to immediate market pressures.

What Makes A DATCO Unique

A Digital Asset Treasury Company is, at its core, a public firm that explicitly and strategically holds a significant quantity of digital assets on its balance sheet as a primary function of its business. Unlike a traditional company that might hold a small amount of cryptocurrency as an incidental investment or for operational purposes, a DATCO’s core business model is centered on the accumulation and management of these assets. MicroStrategy, the pioneer in this space, famously converted its cash reserves into bitcoin in August 2020, establishing the precedent for others to follow.

The uniqueness of a DATCO lies in its dual nature. It is simultaneously a publicly traded company and a capital markets vehicle for direct exposure to a specific digital asset. For investors, this offers a compelling alternative to owning the asset directly or through an exchange-traded fund (ETF). Investing in a DATCO is seen as a high-beta, leveraged proxy for the underlying asset, providing a way to gain amplified exposure through a familiar equity structure.

This model is built on a “reflexive loop” that, when conditions are favorable, can lead to rapid growth. When the price of the digital asset (e.g., bitcoin) rises, the DATCO’s equity value often trades at a significant premium to its net asset value (NAV). This premium allows the company to raise new capital by issuing shares above NAV, a process often facilitated through at-the-market (ATM) programs. The proceeds from these share issuances are then used to acquire more of the digital asset, leading to an increase in the asset per share for existing investors. This positive feedback loop can be a powerful engine for growth, but it is also a fragile one, heavily dependent on market sentiment and a sustained uptrend in the asset’s price.

A Historical Context: DATCOs And Other Permanent Capital Vehicles

While DATCOs may seem like a new and unprecedented phenomenon, they share a striking resemblance to other investment vehicles that have emerged in the past, designed to provide leveraged exposure to a specific asset class. Permanent capital vehicles like Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs), operated on similar principles, seeking to take advantage of favorable market conditions and a low cost of capital.

REITs own, operate, or finance income-producing real estate. When REITs trade at a premium to their underlying net asset value (NAV), they typically issue new shares to raise capital. This capital is then used to acquire more properties, perpetuating a positive feedback loop. However, this model is highly vulnerable to changes in interest rates, economic downturns, and shifts in real estate market sentiment. When the premium collapses, the REIT’s ability to raise capital cheaply evaporates, and it can face significant challenges in servicing its debt or expanding its portfolio.

Similarly, Master Limited Partnerships (MLPs) in the energy sector provide a historical parallel. MLPs typically own and operate energy infrastructure, such as oil and gas pipelines. Their value is tied directly to the health of the energy sector and the price of the underlying commodities. MLPs have also historically relied on capital markets for funding, and their performance is highly leveraged to the underlying asset. Like DATCOs, they offer a way for investors to gain exposure to a specific asset class through a publicly traded, tax-advantaged vehicle. The core risks—funding fragility, reliance on a speculative premium, and sensitivity to market volatility—are common to all these structures.

This historical context is crucial for understanding the DATCO model. The challenges and vulnerabilities they face are not unique to digital assets; they are inherent risks of any business model that functions as a leveraged, permanent capital vehicle for a specific asset class. The companies that succeed will not be those that simply ride the reflexive loop but those that can navigate its inevitable unwinding by building a more resilient, value-generating business.

The Growth Outlook: A Mix of Promise And Peril

The growth trajectory for digital asset treasuries over the near future is a subject of intense debate. Optimists point to a number of factors that are poised to drive continued expansion.

Senator Tim Scott (R-SC) and Senator Cynthia Lummis (R-WY) have led a push for regulatory clarity in digital assets. Photographer: Liam Kennedy/Bloomberg
© 2024 Bloomberg Finance LP

First, regulatory clarity is slowly but surely building. Institutional confidence is on the rise as governments worldwide, including the U.S., develop more structured frameworks for digital assets. Simultaneously, regulatory bodies are increasingly moving beyond caution to actively exploring how digital assets can be integrated into the existing financial system, creating a more predictable environment for companies to operate and for investors to participate.

Illustrations of ethereum, ripple and litecoin ‘altcoins,’ which could benefit from a rise in interest in DATCOs seeking to diversify from Bitcoin investment. (Photo by Jack Taylor/Getty Images)
Getty Images

Second, the broader institutional shift toward digital assets is undeniable. A 2025 survey of institutional investors by EY revealed that a significant majority expect to increase their allocations to digital assets, with a primary goal of portfolio diversification. Beyond just bitcoin, this interest is expanding to include other assets like Ethereum, tokenized real-world assets (RWAs) such as tokenized treasuries, and, of course, stablecoins. The tokenization of traditional assets is projected to be a multi-trillion-dollar industry in the coming years, presenting a vast new frontier for DATCOs to explore. The ubiquity of stablecoins can be correlated to this interest and highlighted by the success of Circle’s June IPO. For illustrative purposes, at over $307 billion in market capitalization, the stablecoin is currently three times the size of DATCOs.

Finally, the unique capabilities of digital assets—such as improved settlement times, lower funding costs, and enhanced transparency—make them an attractive proposition for corporate treasurers seeking to optimize cash management and unlock value beyond traditional instruments. Fintechs are rapidly developing solutions to facilitate these functions, making it easier for a DATCO to operate efficiently.

The Risks Behind The Rewards

However, like other PCVs, the DATCO model carries its significant risks. The central thesis of the DATCO model—the reflexive loop driven by a trading premium—is its most significant vulnerability. This model works beautifully when the market is in a sustained uptrend, but it can unwind just as quickly when sentiment turns. A premium collapse can trigger a negative feedback loop, making it difficult for the company to raise capital without heavy dilution or taking on expensive debt.

Much like REITs, external market factors like interest rates and the cost of capital can drive the valuation of assets, held by DATCOs. (AP Photo/Charles Krupa, File)
Copyright 2018 The Associated Press. All rights reserved.

This brings us to the core issue: the funding costs. Many DATCOs, lacking significant operational revenue, rely heavily on capital markets for funding. While issuing shares at a premium is a powerful tool, it’s not the only one. Companies have also leveraged convertible notes and other debt instruments. The reliance on these forms of capital, particularly debt, can create a fragile structure. As the market experiences a downturn, the ability to service or refinance this debt becomes a major concern. The financial stability of these companies could be called into question, especially those whose market value is highly leveraged to the underlying asset’s price.

Furthermore, the narrow focus on asset appreciation can blind investors and management to the hidden costs of holding these assets. Beyond just the initial funding, there are ongoing expenses for custody, security, regulatory compliance, and risk management. Like any financial market, digital asset markets experience volatility, which necessitates sophisticated risk frameworks, robust governance, and operational excellence to safeguard against fraud and cyber threats. A company that focuses solely on the potential for price gains without investing in these critical infrastructure components is playing a dangerous game.

A Mature Market Will Differentiate The Players

Looking ahead, the future of digital asset treasuries will likely see a bifurcation of the market. The survivors and long-term leaders will be those that evolve beyond a simple “buy and hold” strategy. They will be the companies that can generate sustainable yield from their holdings.

This might involve building out a complementary suite of products or services or investment in vertical integration. This could also involve participating in decentralized finance (DeFi) protocols, such as staking or lending, to generate additional revenue streams. Staking, in particular, offers a way to grow the underlying asset holdings without a corresponding increase in shares, strengthening the token-per-share accretion.

The most successful DATCOs will likely be those that can demonstrate a clear and defensible business model beyond a leveraged play on market sentiment. By bringing various parts of the digital asset value chain in-house—such as custody, trading, and asset management—a DATCO can achieve greater operational control and efficiency, enabling them to provide a more seamless and integrated user experience

Furthermore, vertical integration helps to mitigate reliance on external third parties, which reduces risk and can lead to cost savings by eliminating intermediary fees. By owning and operating more of the value chain, a DATCO can also gain valuable insights into user behavior and market trends, allowing for faster innovation and the development of new, high-demand products.

DATCOs work with crypto wallet providers like MetaMask to generate returns with their treasury holdings. Photographer: Gabby Jones/Bloomberg
© 2025 Bloomberg Finance LP

While the allure of digital asset treasuries is understandable, fueled by the promise of amplified returns and a new era of corporate finance, investors and analysts must look past the shiny veneer of asset appreciation. The true strength of a DATCO will be measured not by the size of its digital asset holdings at a bull market peak, but by its ability to navigate volatile markets, manage funding costs prudently, and building sustainable business models that can withstand the inevitable digital asset market downturns. The companies that master this balance will not only survive but will cement their place as true pioneers in the next generation of finance.

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