Many Crypto Treasury Companies Were a Get-Rich-Quick Trap, Warns Columbia Professor
Columbia Business School professor Omid Malekan said that any analysis of why crypto prices continue to fall needs to include Digital Asset Treasuries (DATs), because in aggregate, they turned out to be a mass extraction and exit event, which is a reason for prices to go down.
He said there are a few exceptions, but he added that he can count them on one hand. Meanwhile, “dozens upon dozens” were launched in a fashion likely to cause value destruction for crypto assets. He argued that, based on his interactions, many of the people launching DATs viewed the model as a get-rich-quick scheme.
Inside the DAT Frenzy
Malekan pointed to jittery investor presentations that glossed over important details, the excessive use of empty buzzwords, and the absence of basic disclosure, including who was being paid. In his tweet, the professor said that the intent behind many of these launches was obvious.
Malekan explained that launching any kind of public entity is expensive, and the money required for the shell / PIPE / SPAC runs into the millions, as do the fees paid to all the bankers and lawyers involved. He pointed out that the money spent on those fees had to come from somewhere.
He also said there were shady “advisory agreement” deals many DATs had, seldom disclosed in the marketing materials, and noted that the money spent on those had to come from somewhere, too. He also shed light on the inherent conflicts of interest of DATs appointing founders or VCs to their boards, then channeling shareholder money to their startups or PortCos.
Malekan said the biggest damage DATs did to the aggregate crypto market cap was by providing a mass exit event for supposedly locked tokens, and he said he is still amazed so many other investors did not cry foul over this. According to him, many alts had far greater circulating supply, and markets are a discounting mechanism, and the easiest thing to discount is “more supply than anticipated.”
VanEck Flags Weakness in DAT Model
Last month, VanEck warned that the DAT model is risky because it relies directly on volatility, and volatility is structurally declining in Bitcoin as adoption grows. According to the global investment management firm, a DAT needs ongoing price swings to fund asset purchases, and a long-term trend toward dampened volatility threatens the core economics of the model itself.
VanEck also flagged structural market issues within this segment and noted that many of the new entrants do not have deep or liquid enough options markets to price risk efficiently. This could eventually leave the “volatility well” depleted and reduce the ability of DATs to purchase assets.
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