At the intersection of traditional finance and crypto assets, there exists a significant market gap: many large institutional investors, such as pension funds, sovereign wealth funds, and endowments, are unable to directly purchase and hold cryptocurrencies due to internal compliance, custody complexities, or regulatory restrictions.
These institutions possess substantial capital, but lack regulated, equity-based, and compliant vehicles to gain exposure to crypto assets. Strategy keenly identified this pain point and transformed itself into a bridge connecting traditional finance and the crypto world. Its shares are traded on mainstream exchanges, providing a compliant channel for restricted capital to enter the crypto space.
The core of Strategy's DAT business model lies in its unique "capital flywheel" mechanism, which perfectly illustrates the theory of "reflexivity" in financial markets.
Core Operating Mechanism
The company primarily raises funds through two financial instruments: an At-the-Market (ATM) equity offering program and convertible bonds. The ATM program allows the company to sell newly issued shares directly on the open market in batches at the current market price, depending on market conditions. Convertible bonds are low- or zero-interest bonds that come with an option to convert into company stock.
The flywheel effect circulates in both directions. In a bull market, the flywheel forms a positive cycle: BTC price rises → DAT stock price and premium increase → financing to buy more BTC → strengthen the market narrative → further push up stock price and premium. In a bear market, however, the flywheel reverses to form a death spiral: BTC price falls → DAT stock price falls further → premium shrinks → financing channels are interrupted → growth narrative collapses → confidence collapses → stock price falls further.
Table: Flywheel effect of Strategy's DAT model
Market environment | Core driving factors | Stock price performance | Financing ability | Final result | ||||||||||||||||||
Bull market | Market optimism | Increase higher than BTC | Enhancement (value-added financing) | Asset scale expansion | ||||||||||||||||||
Bear market | Market pessimism | Third: Premium Leverage and the Linkage of Equity, Cryptocurrency, and DebtStrategy's profit model is built on multiple mechanisms, known in the market as "financial alchemy." Premium Financing Model. The company's core profit mechanism relies on maintaining and leveraging mNAV (the premium of equity relative to net asset value). When the mNAV premium is high, the company is able to conduct "value-added" financing—using higher-valued shares to purchase BTC with a lower actual value, thereby creating additional value for shareholders. The three-pronged drive of equity, cryptocurrencies, and debt. Strategy pioneered a "three-wheel drive" capital model: equity, cryptocurrency, and debt. Funds are raised through zero-interest convertible bonds and additional stock issuances, used to purchase Bitcoin, which then feeds back into valuations and boosts share prices. This is then followed by further financing, forming a cyclical capital appreciation system. Tax Optimization Advantages: As a publicly listed company, Strategy also enjoys certain tax advantages. Through appropriate corporate structure design and financing arrangements, it can optimize the overall tax burden and improve capital utilization efficiency. Fourth, Regulatory Challenges and Global Compliance: The DAT model sits at the intersection of traditional finance and crypto assets, and compliance is crucial to its survival and development. Avoiding classification as an investment company. A key compliance risk facing Strategy is the potential for regulatory reclassification as an investment company. If the stock price remains persistently below net asset value, this could trigger shareholder lawsuits demanding redemptions based on NAV, or even lead regulators to reclassify the company based on historical precedents (such as the Tonopah Mining case in the 1940s or the GBTC incident in 2021). Such reclassification would force the company to comply with stricter disclosure and operating rules, fundamentally changing its business structure. Compliance strategies in different regions. Expanding DAT business globally requires highly localized compliance strategies. This includes leveraging double taxation agreements (DTAs) to optimize tax structures, ensuring substantive operations of overseas companies, and establishing compliant equity structures (such as through ODI filings). V. Continuous Evolution and Ecosystem Expansion Facing increasingly fierce market competition, Strategy is constantly adjusting and evolving its development strategy. Consolidating its first-mover advantage. As the pioneer of the DAT model, Strategy has accumulated significant brand recognition and scale advantages. As of August 2025, the company holds nearly 630,000 BTC, valued at tens of billions of dollars, making it the world's largest corporate Bitcoin holder. Technical Infrastructure Integration. Strategy is continuously strengthening its technology infrastructure, including the potential integration of compliance technology solutions such as electronic signatures to improve operational efficiency and compliance. Global market expansion. Strategy may need to adopt differentiated market strategies based on the regulatory environment in different regions. In emerging markets such as Asia Pacific, establishing alliances with local partners may be a key strategy for expanding its global influence. Sixth, the growing vulnerability of the model. While Strategy's DAT model has achieved significant success, the risks and challenges it faces cannot be ignored. Intensified competition and the decoupling of premium pricing. The most serious risk is the decoupling of the stock price premium from the Bitcoin price. With the emergence of numerous DATs, Strategy's monopoly as "Wall Street's Bitcoin Gateway" is being eroded. Other DAT products have diverted market capital, making it difficult to re-establish its stock price premium. Equity dilution. Strategy's outstanding shares have increased by over 200% in five years. Despite an increase in total BTC holdings, the BTC value per share has been significantly diluted, directly damaging shareholder value. Leveraged volatility risk. DAT stocks carry inherent leverage (financial leverage and premium leverage), resulting in significantly greater fluctuations than the underlying cryptocurrency. Declines in prices could trigger forced selling, exacerbating stock price declines.
Narrative bankruptcy and crowded trading. Early on, DATs relied on a "scarcity premium," but after the launch of spot BTC ETFs, their compliance advantages weakened, with investors focusing more on fundamentals than storytelling, leading to the evaporation of this premium. Convergent trading strategies also made DATs a crowded asset class, and early investors cashing out and selling when the market was favorable could easily trigger a stampede. VII. Future Development of the DAT Model Dr. Xiao Feng believes that while ETFs are an important tool in traditional finance, DATs are the optimal solution for the migration of crypto assets into traditional markets. DATs are not only technically feasible, but also structurally provide a more robust and efficient bridge for crypto assets to enter the traditional financial sector. Over the next three to five years, DATs may become the most promising new investment tool. The current DAT reserve size has exceeded $100 billion, making it a heavyweight alongside spot ETFs ($160 billion). Institutions predict that over the next three to ten years, DATs will replicate the explosive growth of ETFs and become a mainstream carrier of crypto assets. However, the DAT market may also face the risk of saturation and liquidation. As Nic Carter of Castle Island Ventures has compared the current DAT craze to the investment trust mania of the 1920s, he suggests the market may be experiencing irrational exuberance. When DAT supply is sufficient to absorb immature demand, the market will enter a phase of liquidation. The DAT business model pioneered by Strategy undoubtedly offers a new paradigm for traditional companies to embrace crypto assets, but it also faces inherent vulnerabilities and increasing external competitive pressure. In the future, the success of the DAT model will no longer rely on simple asset accumulation, but rather on a combination of precise capital operations, strict risk management, and flexible compliance strategies. In the tide of global crypto-financialization, the DAT model could be a pioneer in innovation or just another bubble in financial history. Its ultimate direction will depend on how it balances the delicate relationship between innovation and risk, premium and value, and narrative and fundamentals. In the midst of a crackdown on crypto privacy technology, Keonne Rodriguez, co-founder of Samourai Wallet, has entered a plea of not guilty to charges of laundering and operating without a license. Samourai co-founders Keonne Rodriguez and William Lonergan Hill have been accused of money laundering related to the privacy-preserving wallet. Allegations suggest that the crypto mixer was involved in processing $2 billion worth of illicit transactions and enabling money laundering activities totalling $100 million. Prosecutors allege Samourai Wallet laundered more than $100 million in criminal proceeds. Disabling automatic media downloads on Telegram Desktop can potentially mitigate the reported vulnerability, although Telegram itself has categorised the threat as likely to be a hoax. The removal of its iOS and Chrome Extension wallets from the market is scheduled for November 1, 2023, although customers will still be able to access their wallets until October 1. The messaging feature will support the 1.3 million Ethereum addresses using the wallet that are human-readable and/or ENS-enabled. As per the details from a tweet thread by Coinbase, iOS users will be unable to send NFTs from their wallets on iOS devices anymore. Porn downloads always carry with them some kind of danger or, in the case of this notorious former hedge fund ... Wallet.app is launching the next stage in its EU-based, fully compliant crypto custody wallet, exchange and payment platform that will ... |
