Digital asset treasury companies (DATs) have emerged as one of the most structurally novel vehicles in public markets, using equity and debt issuance to accumulate Bitcoin and other digital assets as core balance sheet holdings.
Their resilience in a downturn will depend less on volatility and more on liquidity, refinancing windows and continued access to capital markets. Advisers, lawyers and executives say the model is not inherently fragile, but it is reflexive.
When equity trades at a premium to the underlying net asset value, the structure compounds efficiently. When that premium disappears, pressure can shift quickly to refinancing risk and asset sales.
DATs generally fall into two categories. Pure-play treasury companies hold Bitcoin or another token as their primary asset and have minimal operating cash flow. Their funding model is driven by capital markets, often relying heavily on convertible debt and at-the-market equity issuance.
Hybrid DATs combine treasury holdings with mining operations, yield strategies such as staking or derivative overlays and acquisitions funded by balance-sheet Bitcoin or infrastructure exposure. The goal is to pair asset appreciation with operating or yield income.
Michael Leto, managing director and co-head of A&M Crypto at Alvarez & Marsal, told Sandmark that the market now contains a spectrum of both structures. "What we're seeing in the market is a combination of pure-play digital asset treasury companies and what we call hybrid plays," he said. "There appears to be room for both types."
Early entrants accumulated Bitcoin using zero-coupon or low-leverage-type debt, convertible preferred, Leto said. In those cases, the model rests on asset appreciation coupled with low-interest debt.
More recent entrants have layered yield strategies. "Newer players over the last year or two are combining asset appreciation with diversification strategies, generating yield off Bitcoin or Ether through staking, derivative strategies such as covered call options or using their balance-sheet Bitcoin to acquire companies or invest in infrastructure within the digital-asset ecosystem," Leto said.
Across structures, capital stacks share common traits. They often include convertible senior notes, multiple tranches of preferred equity, at-the-market equity programs and unsecured debt. Maintenance covenants are generally limited. There are typically no leverage tests tied directly to Bitcoin price and no mark-to-market acceleration clauses.
This makes liquidity more important than volatility. But falling asset prices alone do not create the potential for default. Liquidity does.
Strategy represents the most prominent pure-play DAT. It holds 761,068 Bitcoin at an average purchase price of $75,696, according to public disclosures filed with the SEC.
The company reported a USD reserve of $2.25bn at the end of the fourth quarter of 2025 and has stated that it intends to maintain that reserve at a level sufficient to fund two to three years of dividends, subject to its discretion.
On its fourth-quarter earnings call, CFO Andrew Kang addressed concerns about Bitcoin trading below the average purchase price. "Recognizing now that Bitcoin's below the average Bitcoin price, you might ask the question: What does that mean? It really doesn't mean anything, right?" he said.
"It doesn't mean that we have any issues servicing our debt or paying the dividends on our preferreds. We don't have any covenants or triggers that say when the Bitcoin price goes below our average Bitcoin purchase price, anything has to occur other than we continue with our strategy."
Strategy's capital structure includes multiple unsecured convertible debt tranches maturing between 2028 and 2030, along with several layers of perpetual preferred equity. In recent years, it has shifted funding from convertibles toward preferred stock issuance, with multiple tranches offering yields approaching those of junk bonds.
Kang said 2025 marked a pivot in capital markets strategy. "The big change last year was we moved from convertible debt, $6.2bn in 2024 and $2.0bn in 2025, to $7bn of preferred," he said. "We invented digital credit, and we invented the preferred market, which now other Bitcoin treasury companies are moving into, issuing perpetual preferreds. We're pretty excited about this."
The structure is senior unsecured debt at the top, followed by multiple preferred equity layers, then common equity. There are no secured tranches and limited operating liabilities, given the absence of a large operating business.
However, Kyle Lawrence, partner at Falcon Rappaport & Berkman LLP, said that in a stress scenario, Chapter 11 would likely function as a restructuring tool rather than a liquidation.
With Bitcoin, "Strategy holds a highly liquid asset that retains value independent of ongoing operations, and the debt is relatively straightforward," conisting of unsecured convertibles without the complexity of secured tranches or operating liabilities," he told Sandmark.
However, Lawrence emphasized that continued equity market access is critical. The strategy depends on issuing equity at premiums to net asset value to fund Bitcoin purchases and service or refinance debt. "A loss of market confidence could force reliance on Bitcoin sales, potentially triggering a downward spiral in both BTC price and equity value," he said.
According to the stated position of Strategy, a Chapter 11 scenario would be unrealistic absent a catastrophic and sustained Bitcoin collapse to roughly $8,000 or below, given current asset coverage and staggered maturities.
DATs are frequently valued relative to market capitalization divided by the value of digital assets held. A premium to NAV enables accretive capital raising. A discount makes issuance dilutive and can erode investor confidence.
In bullish cycles, rising asset prices support equity premiums. Companies issue stock, acquire more Bitcoin and reinforce the narrative of NAV growth per share. In bearish cycles, the loop can reverse. Asset prices fall, premiums compress, issuance slows and refinancing risk becomes more salient.
Kumanan Ramanathan, managing director and co-head of A&M Crypto, said the inability to meet obligations or dividend payments is a key indicator of stress. "That ultimately results in a discount to NAV, which makes them a prime target for consolidation," he said.
"We're seeing digital asset treasury companies preparing for due diligence on potential targets to acquire if those discounts materialize," Ramanathan added.
Leto said institutionalization is increasing across the sector. "We're seeing institutionalization. Companies are putting governance and controls in place. They're accessing traditional debt financing and refinancing markets," he said. "As the market evolves, we expect it to become more traditional and institutionalized."
At the same time, he noted growing selectivity from investors. "We're also seeing reluctance from investors to fund new DATs coming to market. There were many at the finish line, and when the market turned, investors pulled away," Ramanathan said.
Ramanathan said that for existing players, consolidation is likely among smaller companies trading below NAV. "For mature ones, investors are looking for yield. That means more risk, covered calls, deploying collateral into DeFi protocols, arbitraging interest across platforms such as Kamino, Morpho, Aave," he said.
"That introduces more risk because public-company assets are spread across protocols and derivative strategies," Ramanathan said. He added that stronger governance practices such as cold storage and triparty agreements are becoming more common after prior restructuring cycles.
The main structural pressure points in DAT models are maturity risk, liquidity events and capital market closure.
Convertible debt must eventually be repaid, refinanced or converted. If Bitcoin is materially lower, equity trades at a discount and markets are risk-off, refinancing becomes more difficult. Maturity clustering can amplify this risk.
Liquidity events can arise from fundamental change provisions in convertible indentures, which may require repurchase at par plus interest. These are not automatic defaults but could create concentrated cash obligations if exercised simultaneously by large holders.
The most significant risk, however, is loss of equity market access. DATs rely heavily on at-the-market programmes and issuing stock at premiums to NAV. If that premium disappears and investor confidence erodes, companies may need to rely on alternative funding routes rather than accretive issuance.
That is where reflexivity becomes negative. Asset sales could pressure Bitcoin price and equity valuation simultaneously.
Asset concentration also differentiates DATs from diversified corporates. For example, the massive scale of ongoing Bitcoin purchases by pure-play firms means a very large-scale liquidation could potentially alter corporate identity and raise legal questions, depending on jurisdiction.
Still, mark-to-market losses do not equate to insolvency, and volatility does not automatically trigger restructuring. But a liquidity crisis theoretically could.
However, given their simplified and largely unsecured capital structures, out-of-court restructurings are more likely than liquidation in moderate stress scenarios. True insolvency would likely require a severe, sustained digital-asset collapse combined with simultaneous loss of capital markets access and maturity clustering during a shutdown.
They also must increasingly compete with spot Bitcoin ETFs for capital allocation. ETFs offer direct asset exposure, daily liquidity, transparent fee structures and no corporate leverage, making them a cleaner vehicle for investors seeking beta to Bitcoin without capital structure complexity.
When DATs trade at a premium to net asset value, they can justify their existence as leveraged exposure with potential upside from accretive issuance. When they trade at a discount, the comparison becomes less favorable, as investors can access the underlying asset more efficiently through ETFs without refinancing or governance risk.
This competitive dynamic could tighten access to capital markets. If ETF flows absorb incremental institutional demand, DATs must rely more heavily on differentiated strategies such as yield generation, capital structure engineering or operating synergies to justify valuation premiums.
As the sector matures, executives are increasingly framing DATs as long-term capital allocation strategies tied to structural shifts in technology rather than simply speculative vehicles.
Simon Gerovich, chief executive of Metaplanet, has argued that AI-driven productivity gains are concentrating returns among capital owners. "The gains from the productivity boom are flowing almost entirely to the owners of compute and capital. Not labour. Not governments. Capital," he said in an X post reacting to the viral Cintrini Research AI 2028 report.
He added that companies holding cash or bonds are exposed to fiscal systems facing structural pressure. "Every company sitting on cash or bonds is holding a claim on a system whose tax base is evaporating and whose response will be to print."
Gerovich contends that machine-driven economic activity will favour digital assets.
"They transact in digital assets because that's what makes sense for a machine. And when they need to store the value they generate, they won't park it in a money market fund. They'll hold digital capital. They'll hold Bitcoin."
That thesis underpins many DAT strategies. The structural question for investors, however, is not whether Bitcoin appreciates over decades. It is whether DATs can maintain liquidity and access to capital markets through the next downturn.
In bull markets, the model compounds leverage efficiently. In bear markets, stress emerges not from covenants but from refinancing windows, equity premiums and investor confidence.
The decisive variable is not volatility alone. It is what happens if capital market access closes.
