How to survive when the capital flywheel stops and the DAT crash wave occurs?

Assuming that the earlier collapse of the coin stock DAT is inevitable, how should investors respond? What strategies should be adopted? What algorithms and standards are there? Are there successful cases in the market? What are their core competitive advantages?

Reading Guide:

1. Friends who haven't read the previous article are advised to go and check it out: "How to Proceed After a Halving? Decoding the Anti-Fragile Mechanism and Breakthrough Code of DAT Enterprises"

2. If you simply want to see case studies, you can read on.

Part Four: The Truth about the "Moat" and the Future of the DAT Model

After understanding the operating mechanism and risks of "coin stocks", a core question emerges: what exactly is the long-term competitiveness and "moat" of DAT-type companies? Where will their future lead?

4.1. The Truth About the Moat: A "Capital Flywheel" Dependent on Market Sentiment

The real "moat" of DATs does not stem from its business itself, but rather from a highly contextual and fragile financing advantage. Its core competitiveness lies in a powerful cycle of liquidity and financing costs: "financing ability → purchasing more coins → enhancing investor return expectations → attracting more liquidity → reducing financing costs → further enhancing financing ability." This mechanism, known as the "capital flywheel," is essential for understanding its business model.

Positive cycle (in a bull market):

This flywheel can generate strong positive momentum during a bull market.

1. High premium is the fuel: The company's stock price is trading at a price higher than the net asset value (NAV) of its held digital assets, creating an "equity premium" (mNAV Premium). This premium is the key fuel that starts the entire flywheel.
2. Financing capability activated: With a high premium, the company can engage in "accretive" financing by issuing new shares or low-interest convertible bonds, that is, using highly valued stocks to obtain funds to purchase more digital assets, thereby expanding the balance sheet without diluting or even increasing the per-share coin amount.
3. Liquidity and Low Costs: When market sentiment is high and stock liquidity is excellent, companies can easily sell large amounts of new shares in the open market without causing significant price impact, which greatly reduces the friction costs of financing.
4. "Buy Buy Buy" Reinforces Narrative: The company will continuously buy more digital assets with the funds raised, which not only increases the company's net asset value but also reinforces its market narrative as a "growth engine," attracting more investors, further driving up stock prices and premiums, creating a strong positive feedback loop.

Reverse Destruction (in Bear Market):

However, this powerful engine has a fatal flaw: it relies entirely on sustained bullish sentiment and high stock premiums. Once the market turns, the flywheel can quickly reverse and turn into a "death spiral":

1. Premium disappears, fuel runs out: When the price of the underlying coin falls, the stock price of the "coin stock" will drop even more sharply, leading to a rapid contraction of its mNAV premium, and even turning into a discount.
2. Financing ability is frozen: Once the premium disappears, any financing behavior through issuing additional shares will be "dilutive." At this point, the company can no longer engage in value-enhancing financing, and its core growth story collapses. The financing ability — this sole moat — dries up instantly.
3. Negative feedback loop: The depletion of financing channels and the collapse of growth narratives can trigger panic selling by investors, further suppressing stock prices, creating a vicious cycle that may ultimately lead to a collapse in stock prices.

Therefore, the moat of DATs is extremely narrow and unstable, as it relies entirely on the fickle sentiments of the capital markets. Once the market sentiment reverses and the premium disappears, this moat will dry up instantly, and the company will lose its only competitive advantage.

4.2. Comparative Case Studies: Practice and Variation of Strategy

Although the basic patterns are similar, different DATs exhibit significant differences in the execution of specific strategies, reflecting their different understandings of their positioning, market environment, and regulatory constraints.

Strategy Inc. (MSTR) - Aggressive Pioneer

As the pioneer of the model, MicroStrategy's strategy is the most aggressive. It not only makes extensive use of various debt instruments (such as convertible bonds) to maximize leverage, but its founder Michael Saylor has also created a "soft moat" for the company through his strong personal brand and continuous evangelism. He has successfully deeply intertwined MicroStrategy with BTC, making it the most recognized BTC proxy stock in the hearts of global investors, and this brand awareness has, to some extent, solidified its mNAV premium.

Metaplanet Inc. (3350.T) - Flexible International Adaptor

The case of Metaplanet demonstrates how the DAT model innovates and adjusts according to the market environment of specific countries or regions. Its strategy cleverly leverages Japan's unique macro and regulatory environment:

• Yen Carry Trade (: Against the backdrop of the Bank of Japan maintaining ultra-low interest rates for a long time, Metaplanet borrows yen at nearly zero cost and converts it into BTC, which is expected to appreciate in the long term, thus conducting macro arbitrage.
• "Moving Strike Warrants" ): Due to Japanese regulations prohibiting the common ATM issuance mechanism in the US stock market, Metaplanet innovatively uses a warrant that links the exercise price to the previous day's closing price. This design ensures that the warrant is only exercised when the stock price rises, thereby achieving a similar effect to ATM, allowing for dilution financing at high stock price levels.
• Tax advantages: Japan imposes high progressive taxes on individuals who directly hold cryptocurrency, while the capital gains tax rate on stock investments is much lower (approximately 20%). This tax disparity makes it more attractive for Japanese investors to indirectly hold BTC by purchasing Metaplanet stock, creating localized demand for their shares compared to directly buying BTC.

Semler Scientific (SMLR) - Cautious Business Integrator

Semler Scientific represents another, more conservative strategy - the "Slow Money" model. The company plans to use the stable cash flow generated by its core healthcare business to gradually and prudently purchase BTC, aiming to achieve a more "value-adding" accumulation of assets for shareholders. This model is theoretically more sustainable because it does not rely entirely on external financing. However, the challenge is that the company's core business is facing growth bottlenecks and regulatory pressures, which complicates the narrative of generating sufficient cash flow to support large-scale BTC purchases.

Tron Inc. (TRON) - Reverse Merging and Mixing Mode

Tron Inc.'s case showcases a non-traditional path to going public and a unique business structure. The company, formerly known as SRM Entertainment, entered the public market through a reverse merger with TRON DAO and rebranded as Tron Inc. This strategy enabled it to quickly become a Nasdaq-listed company and focus on building a financial reserve for the TRX token. Its uniqueness lies in its hybrid business model: it retains the original business of designing and manufacturing custom products for large entertainment venues such as Disney and Universal Studios, while also exploring blockchain financial strategies. Additionally, the company actively utilizes its TRX reserves for staking, generating annualized returns of up to 10% through platforms like JustLend, which provides a non-dilutive cash flow for its operations. (From a bird's eye view, the $TRX token has not left the Tron network.)

BitMine Immersion Technologies (BMNR) - Aggressive Ethereum Whale

BitMine (BTMR) represents a radical expansion of the DAT model into assets beyond BTC. The company has transitioned from BTC mining to focus on becoming the world's largest enterprise-level holder of Ethereum (ETH), setting an ambitious goal of holding 5% of the total circulating ETH. Its strategy is characterized by an astonishing pace of financing, accumulating billions of dollars worth of ETH reserves in a short time through large-scale private placements (PIPEs) and equity financing. This aggressive accumulation strategy has attracted high-profile investors including Peter Thiel's Founders Fund and Stanley Druckenmiller, with Fundstrat's Tom Lee serving as chairman. However, the stock price performance of BMNR has been extremely volatile, experiencing surges of thousands of percentage points followed by significant corrections, highlighting its high-risk, high-reward nature. Due to its core business (mining) generating meager income and being in a loss state, its valuation is almost entirely driven by market expectations of ETH prices and confidence in its financing capabilities.

Main DATs Strategic Comparison Analysis

(# 4.3. Next Evolution: "Productive Finance"

In the face of the inherent fragility of passive holding strategies, the DAT model is undergoing an important evolution, shifting from "Passive Treasury" to "Productive Treasury."

The traditional BTC financial strategy is essentially a passive "digital gold" strategy, where the asset itself does not generate any cash flow. In contrast, the "productive finance" model focuses on holding digital assets that can generate returns through network-native mechanisms, primarily utilizing public chain tokens that adopt the POS consensus mechanism, such as ETH and SOL.

By staking ETH or SOL that they hold, companies can receive token-denominated rewards directly from the protocol. This staking yield is an intrinsic, crypto-native "interest" that does not rely on traditional credit markets, providing companies with a stable and non-dilutive source of cash flow. The emergence of this model signifies that DATs may transition from purely financial engineering vehicles to operating companies with real crypto-native businesses. For example, companies like DeFi Development Corp. )DFDV### are focusing on accumulating SOL and generating staking yields through operating validation nodes. (TRON Inc is also considered to be at the forefront of the times.)

This evolution towards "productive finance" is a strategic response to the reality that the moat of passive holding models is too fragile. By creating endogenous cash flows that are decoupled from capital market sentiments, these companies are attempting to build a broader and deeper economic moat, thereby reducing their extreme dependence on financing capabilities during bull markets and providing a more solid foundation for their long-term survival and development.

( Part Five: Conclusion - Seeing the Essence Through the Mist

For investors looking to invest in such companies, it is essential to discard the view of them as simple "crypto asset stocks" and instead assess them as a highly speculative, actively managed leveraged fund. The ultimate investment performance depends on the complex interaction of the following four core variables:

1. The price performance of underlying crypto assets: This is the foundation that determines the company's Net Asset Value (NAV).
2. The financial engineering capability of the management: that is, how quickly, at what low cost, and with what minimal dilution the company raises funds and converts them into assets.
3. Market sentiment in the stock market: This is the key factor determining the premium level of the company's mNAV, directly affecting its financing ability and the strength of the "flywheel effect."
4. Net cryptocurrency asset holding per share: This determines the level of cryptocurrency assets allocated to each share.

Taking Strategy InBTC as an example, when assessing "coin stocks", it is important to closely monitor the following key indicators, rather than just focusing on the total amount of BTC held as announced by the company:

• Per share (fully diluted) crypto asset content: This is the most important indicator of measuring the true exposure of shareholders. Investors should closely monitor its historical trend to determine whether the company's financing activities are value-adding or value-diminishing in the long run.

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Analysis of equity dilution and per share BTC holdings of Strategy Inc. (MSTR)

• The trend of mNAV premium: Is the premium expanding or contracting? A continuous contraction of the premium is a clear signal of weakened market confidence and increased risk. Comparing it with peer companies and related ETFs can better assess whether its valuation is reasonable.
• Financing/Issuance Terms: Carefully study the specific terms of each bond issuance or capital increase by the company, including the conversion price and interest rate of convertible bonds, as well as the execution scale and price of the ATM plan. These details reveal the company's future dilution risk and financial pressure.

To know what it is, and to know why it is.

The "capital flywheel" that drives DAT's stock price surge in a bull market is precisely the fundamental reason that accelerates its decline in a bear market. Its core business model—financing the purchase of more assets by leveraging high stock price premiums—is itself a double-edged sword. This extreme reliance on capital market sentiment determines that their fate is inevitably closely linked to the cyclical fluctuations of the market.

May we always maintain a heart that reveres the market.