Shocking! Bitwise Says Most Crypto Treasuries Are Actually Cheaper Than Their Holdings!
Bitwise Warns Most Crypto Treasuries Will Trade Below Their Holdings: Here’s Why
In a new analysis that’s already stirring conversations across the digital asset sector, Bitwise Chief Investment Officer Matt Hougan is warning that most digital asset treasury companies—commonly referred to as DATs—will likely trade below the total value of the cryptocurrency they hold. According to Hougan, this pricing gap isn’t merely a temporary market trend; instead, it is rooted in structural and long-standing forces that consistently pull valuations lower.
Hougan’s assessment arrives at a time when traditional markets are increasingly intersecting with digital assets. The crypto industry has matured significantly over the past five years, with institutional funds, sovereign wealth entities, and major public companies now holding billions of dollars’ worth of Bitcoin, Ether, and alternative assets in their corporate treasuries. But despite that progress, Hougan argues that the financial math simply isn’t on their side.
A Framework Built on Decline, Not Premiums
According to Hougan, digital asset treasuries must be viewed as “finite entities” that are structurally predisposed to downward price pressure. Unlike growth-oriented tech companies or service-based firms that generate revenue, DATs commonly operate with a limited scope: they hold cryptocurrency, provide security around those assets, and incur operational costs along the way.
This setup, Hougan says, leads to a predictable valuation outcome.
“There are automatic discount forces built into the structure of digital asset treasuries,” he explained in his analysis. “They lack natural revenue streams, face ongoing expenses, and operate with execution risks that investors must price in.”
Hougan outlined three primary forces driving this downward valuation trend:
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Illiquidity discount
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Operating expenses
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Execution risk
Each of these, he argues, erodes the potential for these companies to ever trade at or above the net value of their underlying cryptocurrency holdings.
The Illiquidity Discount: Investors Won’t Pay Today for Assets Received Tomorrow
At the top of Hougan’s list is the illiquidity discount, a core structural challenge facing any entity that locks up assets for prolonged periods.
Imagine a company holding $1 billion in Bitcoin. In a perfectly liquid world, the company’s valuation might mirror that number. But Hougan explains that investors typically won’t pay the full market value of a cryptocurrency they cannot access immediately.
“Why would an investor pay today’s price for Bitcoin that they might only receive months or even years from now?” Hougan asked. “The gap between ownership and delivery automatically inserts a valuation markdown.”
This effect is similar to what occurs in bond markets, real estate investment vehicles, and even certain hedge fund structures. When assets cannot be freely accessed, the market applies a discount to compensate for delayed liquidity. In the case of crypto treasuries, that discount becomes steep because many DATs do not offer clear or near-term redemption pathways.
Operating Expenses: Value Lost One Dollar at a Time
Next comes operating expenses, a factor Hougan calls “the silent drain” on crypto treasuries.
Unlike decentralized protocols, which can scale without executives or administrative overhead, digital asset treasuries are companies, and companies spend money. Salaries, legal fees, audits, custodial contracts, cybersecurity, marketing, and compliance are all part of the cost structure—even for a business that does little more than hold crypto.
Hougan emphasizes that every dollar spent is a direct subtraction from shareholder value.
“When the company pays for staff, utilities, or administration, that money comes directly from the assets that back the share price,” he said. “Investors are effectively funding the operations themselves.”
For companies holding volatile assets like Bitcoin, which can swing 10% in a day, these slow but consistent fiscal leaks add persistent downward pressure. Over the course of years, this operating drag compounds, pushing valuations further below asset value.
Execution Risk: The Price of Human Error
The third major factor in Hougan’s framework is execution risk, which represents the probability that a company may mishandle funds, mismanage custody, execute poorly timed trades, or fail to keep up with cybersecurity threats.
While major custodians have improved dramatically in the past decade, the risk remains far from zero. In fact, the rise of digital asset companies has brought with it multiple high-profile failures—from mismanagement to fraud to simple operational error.
Hougan argues that these risks must be reflected in market pricing.
“In traditional finance, investor trust is earned through decades of stability,” Hougan noted. “Crypto treasuries, by comparison, are new, and many of them have untested teams, untested controls, and untested processes.”
To investors, this creates another layer of discount pressure. Even in the absence of an actual failure, the mere possibility of one reduces the price investors are willing to pay.
Only Four Strategies Can Offset the Discount—But Only Barely
While Hougan’s assessment may sound bleak, he did identify four possible strategies for crypto treasuries hoping to outperform their natural discount. However, he stresses that these strategies are difficult, risky, and only effective under ideal conditions.
1. Issuing Debt
DATs can borrow money against their crypto reserves. If the cost of borrowing is lower than the growth rate of the cryptocurrency, the company can create a positive spread.
But this strategy requires precise execution, favorable interest rates, and a strong risk management apparatus—all rare in the crypto space.
2. Lending Tokens
Crypto lending can, in theory, generate income that offsets the discount. But lending markets present their own risks, including counterparty defaults, smart contract vulnerabilities, and market liquidity shocks.
3. Using Options
Derivatives strategies such as covered calls or protective puts can be used to generate small, steady returns. But options are complex and often require expert oversight to avoid catastrophic losses.
4. Buying Assets Below Market Price
The most straightforward strategy—purchasing cryptocurrency at a discount—can work well, but such opportunities are limited and competitive.
Hougan warns that none of these strategies guarantee success. Each introduces new risks and requires near-perfect execution to produce meaningful premiums.
What This Means for Investors
The takeaway from Hougan’s analysis is clear: crypto treasuries are structurally unlikely to trade at or above the value of their underlying assets.
For investors, this means:
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DATs should be viewed with the same caution applied to closed-end funds that routinely trade at discounts to NAV.
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Premiums should be seen as temporary, speculative anomalies—not sustainable features.
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Portfolio diversification should focus on entities with actual revenue generation, not merely asset storage.
In other words, a company holding $500 million in Bitcoin is not the same as a company worth $500 million.
A Growing Industry Faces a Hard Reality
As digital assets continue entering mainstream finance, the business models surrounding these assets must evolve. Hougan’s analysis, while sobering, may help accelerate that evolution by highlighting the structural flaws in the current approach.
The message is simple but powerful: holding cryptocurrency as a business model is not enough.
For digital asset treasuries to command higher valuations, they will need:
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sustainable revenue streams,
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efficient cost structures,
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robust security frameworks, and
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investor-friendly liquidity mechanisms.
Until then, discounts to cryptocurrency holdings will remain not just common—but expected.
Source: CMC News
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