The big idea and why it matters: The blockchain and cryptocurrency have become significantly more mainstream in both application and accessibility since early 2024. Not only is the blockchain becoming an integral part of software solutions, but cryptocurrency is also being utilized as a form of currency diversification.
“I still find it all a mystery. Could it be a dream? The road to nowhere leads to me.” -Ozzy Osbourne, The Road to Nowhere.
Ozzy Osbourne’s iconic No More Tears album was released nearly 35 years ago, in September of 1991, when he teamed up with yet another of rock’s all-time great guitarists – this time being a 19-year-old prodigy by the name of Zakk Wylde – and created some of his most well-known songs. As today’s quote implies, a then-42-year-old Ozzy was surprised that his unconventional path through life had led him to that point. He likely even thought he was nearing the tail-end of a successful music career, which is at least partially supported by his release of a greatest-hits album, The Ozzman Cometh, a handful of years later.
Thus, I’m sure he would have been absolutely astounded to find out it was only the beginning of his real notoriety through massive endeavors like the Ozzfest music festival that ran for over 20 years (1996-2018) and becoming a household name as a family man in The Osbournes TV show in the early 2000s. We officially said goodbye to this unique rockstar on July 22nd of this year, and it only then dawned on me that I couldn’t name another artist who was a more consistent part of my life’s soundtrack and coming-of-age memories than Ozzy. Appropriate for the recent Halloween season, the first of those memories was scaring myself with my neighbor by listening to Black Sabbath’s Iron Man in the dark when we were about 7 years old – well before I knew anything about the man behind that voice. Thank you to Ozzy for the music and memories, and may he rest in peace.
We haven’t covered blockchain and crypto updates since May of 2024. Given that a year and a half is like a lifetime in this ever-evolving sector, we are overdue for an update. Similar to my experience with Ozzy, blockchain is now everywhere in our lives, but most of us may not even be aware of it. And while it has come a long way already – gaining regulatory clarity and ETF approvals that imply achieving critical mass – this technology is likely only in the early innings of its ultimate adoption. Today, we’ll explore some areas where blockchain is being utilized, examine its current applications, and consider what comes next. Here we go!
At the time of the last update, Bitcoin had just gone through its fourth halving. The price then was roughly $65,000 per Bitcoin. When I first wrote this paragraph, the Bitcoin price was about $115,000, but now – about a week later – it has fallen to about $102,000 (run-of-the-mill crypto volatility). While this general increase in price (with more volatility along the way) is worth mentioning for a sort of “state of the union,” I don’t think that tells us much about either Bitcoin, crypto, or blockchain, other than people’s willingness to pay more for it than they did at some point in the past (note: “people” are often wrong). If nothing else, it serves as a good reminder of how quickly things can change in the world of crypto and investing, in general.
I’ve been noticing an ongoing trend where crypto assets are being housed in traditional public market structures. After all, what’s easier than owning cryptocurrency directly? Owning cryptocurrency through an ETF held in your same old brokerage account at your same old custodian; this idea is the most mainstream, since ETFs have had no shortage of headlines dedicated to them, enduring many legal/regulatory battles and denials before eventually gaining regulatory clarity and approval. Unsurprisingly, then, Pantera estimated that, as of Sept 2025, there were 43 Bitcoin ETFs (!), held by 165 public companies. But other structures are less noticeable, so let’s briefly take a look at those.
Ozzy’s “Crazy Train” is likely his most universally recognized song, given it’s a hype song played at many sporting events (and certainly Steelers and Patriots NFL games). I’m not suggesting that the DAT application of crypto is a sign of “going off the rails,” but it surely is an attempt to enhance the return profile compared to direct (i.e., “spot”) cryptocurrency ownership. Here’s the rundown:
Digital Asset Treasuries (DATs) are a recent phenomenon in the “cryptosphere.” There are two different things that I’ve heard “DAT” refer to. The first is that many public companies hold cryptocurrency as part of their treasury assets on their balance sheet (supported by the above ETF stat). As this Bitwave article points out, some of the reasons a company may do such a thing are:
- Inflation hedging
- Currency diversification
- Alignment: if they are a tech company and have a belief in the future of crypto, for example, then this refers to being aligned with investors and that notion
- Operational efficiency: e.g., instant cross-border payments
Now, some of the above are debatable and could ultimately be like setting a portion of the balance sheet on fire. Still, if the company really believes in these things and sizes them reasonably, then I’d expect investors to take it in stride (if only mainly because they aren’t aware of it). I should mention that the last cited reason is that this could help the company “enjoy premium valuations.” That, unlike the other reasons, strikes me as attempting to trade the balance sheet, rather than manage risk and liquidity.
In the second style of DAT, or perhaps more accurately, DATCO (Digital Asset Treasury Companies), the only business of the publicly traded company is to hold/manage cryptocurrency. The reason these caught my attention is that some respected investors are involved in the space – such as Tom Lee, the former Chief Equity Strategist of J.P. Morgan and founder of the independent research firm Fundstrat. The DAT (or DATCO) concept is straightforward: instead of investors buying the spot cryptocurrency, they purchase shares of a publicly traded company that owns the spot cryptocurrency. [Note: When I hear “company,” it comes with an implication of a business responsible for actual goods or services, so I think these DATs are more easily envisioned as ticker symbols that hold crypto.]
DATs have emerged because some people clearly think it’s a better way to own cryptocurrency. Let’s walk through the logic using a fictitious cryptocurrency, TrezCoin:
- I own the publicly-traded ticker symbol ZZZ (a “company”) and decide to transform it into a DAT. Using the company’s assets, I assume I can buy one TrezCoin for every share.
- I then stake my TrezCoins, which generates a yield in the form of additional TrezCoins. Therefore, ZZZ now holds more than one TrezCoin per share.
- The thing about publicly-traded companies (or most businesses, for that matter) is that they are usually valued at a price greater than just the value of their assets. Thus, TrezCoin begins to trade at a premium to the underlying value of the TrezCoin portfolio.
- ZZZ can borrow against its enterprise value to – you guessed it – buy even more TrezCoins!
- Rinse and repeat.
The above items 1 & 2 make sense to me, as it’s simply a yield reinvestment play (assuming that yield outweighs costs of running the “company”); however, there’s no rule that says the DAT’s share price needs to follow the price of the underlying crypto directly, so there is an added layer of risk or disconnect. Items 3 & 4 are where some magnification or overt leverage comes into play, and that can cut both ways. Item 3 is beyond the control of the company or investors, as it will be a factor of supply/demand/sentiment. However, Item 4 is where the DAT management will reveal their intentions and risk management strategies. Given the volatility of crypto and the potential for a DAT to “overdo it,” one would expect to see future headlines regarding some wealth destruction in at least one of these structures (but I’ve been wrong before).
I hope you’re excited that we still have more to cover on this topic, but this edition is already running way too long, so…
Until next time, this is the end of alt.Blend.
Thanks for reading,
Steve
