Digital Asset Treasuries to Drive ETH More Than Bitcoin, Solana: Standard Chartered

His main point: over time, DATs are likely to help Ether (ETH) more than Bitcoin (BTC) or Solana (SOL).

ETH has the edge

Kendrick gave three reasons in a research report dated 15 Sept: 

• First, companies that can borrow cheaply can buy more crypto, which helps them grow faster.
• Second, the biggest DATs can trade at a higher “market Net Asset Value” (mNAV). This is the ratio between the company’s enterprise value and the value of the crypto it holds.
• Third, ETH and Solana DATs may deserve higher mNAVs than Bitcoin DATs because ETH and Solana can earn staking rewards.

It’s important to understand how staking influences this analyst’s view of which treasuries might do well going forward. Holders of ETH and Solana can earn a return by locking up their tokens to help run the network. This is called a staking yield and it's a similar concept to TradFi notions of interest or fixed income yield. ETH staking often works out to roughly a 2 percent return per year after inflation. That extra income can support higher valuations for companies that hold a lot of ETH.

mNAV collapse and saturation

There is a problem, though. Recently, DAT share prices have dropped because their mNAVs have fallen. This matters because a successful DAT usually needs an mNAV above 1 to keep buying more crypto. 

“For flows to be sustainable, the business model needs to be sustainable, and that means mNAVs above 1,” said Kendrick.

The main reason for the drop is market saturation, according to the analyst.

Since the start of the year, the number of companies copying Strategy (formerly MicroStrategy) – the most aggressive crypto corporate treasury playbook – rose from 38 to 89. Over the same period, the total Bitcoin they held jumped from 28,500 to 157,000 coins – a more than five-fold increase. 

At the same time, many investors cannot buy crypto directly because of compliance and onboarding barriers. As a result, their only option to gain exposure is through shares of publicly listed DATs. 

Adding to that, earlier this month, the Nasdaq reportedly began requiring some companies to get shareholder approval before issuing new shares to fund crypto purchases, which will slow or block DAT buying behaviour.

Consolidation

This setup also points to consolidation, especially among Bitcoin-focused DATs. If a DAT’s mNAV falls below 1 (meaning the value of its crypto holdings are greater than the company’s enterprise value), it has less capacity to buy coins in the open market. 

Kendrick suggested there is a “strong possibility” that bigger players like Strategy may choose to buy rival DATs instead. Such moves add no new demand for Bitcoin and simply shift ownership.

Kendrick’s conclusion follows from this. Because consolidation among Bitcoin DATs would not create new buying, and because SOL-focused DATs are less established than ETH-focused ones, the recent increase in DAT purchases is more likely to continue with ETH than with Bitcoin or Solana. 

“We see DATs as being a more positive driver for ETH than for BTC or SOL going forward,” he concluded in the report.