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Hedge fund analyst sends harsh warning on Wall Street's new craze
Ryan Watkins, co-founder of thesis-driven hedge fund Syncracy Capital, is making the case that Digital Asset Treasuries (DATs) — which collectively control more than $105 billion in assets and represent a sizable portion of supply on major blockchains — present both risk and opportunity.
Watkins wrote:
Wall Street's new 'gold rush'
DATs have been faster to scale than at any point in history, rivaling past crypto fundraising crazes, Watkins believes. Furthermore, he notes that most of the conversation has been focused on short-term speculation — how much it can raise, how long premiums will last, and what tokens are next to catch interest.
"Most DATs lack substance beyond their financial engineering and will likely fade away once the music stops," he wrote in a blog.
Nevertheless, Watkins believes the current frenzy is a necessary bootstrapping phase.
From foundations to Berkshire Hathaways
Watkins imagines a few DATs growing into for-profit, publicly traded analogues to crypto foundations — but with wider mandates. Rather than just shepherding ecosystem cash flows, they could plow profits into asset accumulation, product development, and governance maintenance.
Watkins believes only a limited number of DATs will survive in the long run. "Not all DATs will make it to the promised land," says Watkins.
Instead of just supporting their ecosystems, they would use profits to buy more assets, build new products, and even influence governance decisions.
Some already have more tokens than the foundations behind the blockchains they support. Watkins suggested that these DATs will operate somewhat like a cross between a fund, a bank, and a multinational conglomerate, Berkshire Hathaway, focusing on long-term growth.
Risks associated with DATs
However, Watkins has some serious concerns. He observes that the frenzy is causing opportunistic operators to gain access to capital to acquire tokens, hedging the exposure in anticipation of premium selling, which he compares to the ICO mania of 2017 and the Web3 venture frenzy of 2021.
Currently, the majority of DATs are financed through common equity, which insulates them from being forced to sell. However, Watkins believes that once a downturn begins, pressure from shareholders could lead to aggressive financial engineering, including the divestment of core assets.
This article has been published in thestreet.com via Yahoo News.
