For decades, corporate treasury management followed a very simple playbook of protecting the company’s cash. Excess capital was typically parked in bank deposits, short-term government bonds or other low risk investments for the purpose of preserving value and providing liquidity whenever needed. The treasury largely served as a place for stability and away from any sort of bold investments.
However, over the past few years and especially since last year, corporate treasury management has taken on a new meaning altogether. Publicly listed companies have not shied away from using their balance sheets to gain exposure to cryptocurrencies such as Bitcoin, Ethereum and other altcoins.
We’re not talking about a portion being allocated but a noticeable trend in companies adopting the so-called digital asset treasury, or DAT for short, as their primary treasury strategy. In other words, this type of treasury strategy is flipping the status quo of the preservation first mindset to seeing their treasury as an active investment engine. These DAT companies view cryptocurrencies as investments that will grow significantly over time and ultimately benefit the company’s balance sheet, investor appeal and long term growth narrative.
Over the past two years, around 30 companies have transformed to DATs and today they hold cryptocurrencies worth over $69 Billion. The acceleration of this trend has however put forth an uncomfortable but important question to the table. Can these companies be seen as businesses with a treasury on the side or are they a type of leverage instrument to hold and accumulate crypto?
Before answering this question and looking at the advantages and risks associated with this model however, it’s important to break down the mechanism and understand how the crypto treasury feedback loop actually works in practice.
How the Crypto Treasury Flywheel Works
The reason why companies like Strategy, Bitmine and others are flocking to add digital assets to their balance sheets is because of something called the crypto treasury flywheel. Essentially, it is a feedback loop that is extremely lucrative when market conditions are favourable. Let’s break it down step by step to understand how this works:
Step 1: A public company decides to buy and hold crypto in its treasury
The process starts with a public company using part of its cash reserves to buy digital assets like Bitcoin, Ethereum or other altcoins. Traditional investors see this as an avenue to get exposure to crypto via a regulated public company.
Step 2: If and when crypto prices go up, the company’s balance sheet looks stronger
When the crypto holdings go up in value, this props up the company’s value too. The fact is that an upside trajectory in their holdings essentially makes the company look “richer” on paper. This, in turn, often improves sentiment around the stock. As investors anticipate future accumulation and momentum, in bull markets, this can result in the company’s stock rising more than the underlying crypto.
Step 3: The stock starts trading at a premium and that premium becomes useful
This is a key inflection point in the entire flywheel journey. If the market values the company higher than the value of its crypto holdings (and its business), the company is now trading at a premium. Think of it in this way: the market is essentially saying “we’ll pay extra for this wrapper because it gives us easy exposure”. This is where you come across the term multiple of Net Asset Value or mNAV for short. This is basically a yardstick to measure whether at a premium or discount to the value of its crypto holdings. If mNAV = 1.0, this means the company is trading in line with the value of its crypto. If mNAV = 2.0, this tells you the company is trading 2x the value of its holdings and anything below 1.0 is indicative of a discount.
Step 4: The company raises money using that higher stock price
Once the stock is up, the company can raise capital more easily. This can be done in two common ways:
- Issue shares (sell new stock to investors)
- Issue debt (borrow money)
This is where something called convertible bonds come in.
Step 5: Convertible bonds enter the picture
The easiest way to understand convertible bonds is as a loan that can be turned into shares later. Investors like this instrument because if the stock goes up in value, they can convert and benefit like shareholders. On the other hand, if the stock does not accrue in value, they still hold a bond that should get repaid.
For investors, it’s a way to gain exposure on upside without taking full equity risk. For the company, it can be a cheaper way to borrow than a regular bond, especially when investor sentiment is strong and the stock is trading at a high mNAV.
Step 6: The company uses that new money to buy more crypto
This is when the flywheel really gets into motion. The company uses the capital it raised (via shares or convertibles) and buys more digital assets. That increases crypto holdings per share, makes the narrative stronger and can potentially push the stock higher.
Step 7: Repeat
The feedback loop then enters a self perpetuating cycle of buying crypto to stock rising to raising money to buying more crypto. A key point here is that this flywheel really depends on confidence and price momentum within the underlying crypto asset. Raising money can become harder if the stock trades below its premium and this ultimately can slow down, or worse, cause an inverse impact on the loop. This is why the DAT strategy has often been questioned as a risky endeavour. Although the purpose of this blog is to introduce the mechanism rather than get into the downsides, it’s important to acknowledge the basic structural vulnerability.
The Origin Story and Where We are Now
The first public company crypto treasury move came in August 2020 when Strategy (then Microstrategy) publicly disclosed a $250 million purchase of BTC (about 21,454 BTC at the time). Fast forward to February 2026, Strategy is now by far the largest DAT holding 717,131 BTC or 3.41% of Bitcoin’s total supply across 99 separate buy orders.
What began as a Bitcoin-first strategy has since evolved into something broader. Once the market saw that balance sheets could be used as vehicles for digital asset exposure, it was only a matter of time before the model expanded beyond a single asset. The logic was simple: if the flywheel works for Bitcoin, it can theoretically work for other large, liquid crypto networks as well.
Today, public companies are accumulating and building treasuries in other major cryptocurrencies too, especially Ethereum and Solana. This DAT model of going beyond a Bitcoin-first strategy really came into effect last year when public companies like BitMine and SharpLink began aggressively adding ETH to their treasuries.
We can see this big shift by looking at the speed at which these companies have absorbed the supply of these assets. At the time of writing, public companies hold 2.57% of Solana’s total supply and Ethereum at over 5%. A reality that simply did not exist even if you look back just a year ago. Beyond these two networks, there are companies also accumulating other large cap layer 1 networks such as BNB, HYPE and SUI.
Why Investors Buy the Wrapper Instead of the Asset
A natural question that follows is simple: if investors want exposure to crypto, why not just buy the asset directly? The answer lies in structure. Public companies offer a regulated, familiar wrapper that fits neatly into traditional brokerage accounts and institutional mandates. Investors can gain exposure through equities or bonds without dealing with custody, wallets, or exchange risk. For many funds, that convenience alone is enough to justify buying the stock instead of the token.
There is also a strategic element at play. Some investors believe the wrapper can outperform the underlying asset when the flywheel is working. If a company is able to raise capital at a premium and accumulate more crypto per share, the equity can move more aggressively than the asset itself. In that sense, investors are not just buying Bitcoin or Ethereum, they are buying a capital allocation strategy layered on top of it.
However, with the recent downturn in crypto markets, this model is being questioned and rightly so. When prices fall and premiums compress, the flywheel loses momentum. Raising capital becomes harder, dilution risk increases, and the gap between the wrapper and the asset narrows. This does not mean the DAT model disappears, but it does force investors to reassess its sustainability. A follow-up article will examine these structural risks in detail and explore what happens when the flywheel slows down.
Source: https://www.cryptopolitan.com/the-wrapper-economy-how-the-crypto-treasury-flywheel-works/
