Bitwise CIO Warns of 'Structural Drag' for Crypto Treasuries as MicroStrategy Defies the Odds
Matt Hougan, the Chief Investment Officer at Bitwise, has delivered a cautionary outlook for the Digital Asset Treasury (DAT) industry. He believes that most companies in this category will eventually trade at prices lower than the value of the crypto assets they hold. His reasoning is that persistent structural issues—such as the cost of running the business, friction in buying and selling assets, and general execution risk—tend to outweigh the limited methods available for reliably increasing the amount of cryptocurrency backing each share. In Hougan’s view, these companies function like closed systems in which predictable negative forces compete against uncertain and difficult growth opportunities. He highlights three main sources of downward pressure: liquidity constraints, ongoing expenses, and operational risk.
The liquidity discount arises because investors typically refuse to pay full spot value for digital assets they cannot immediately access, often demanding a haircut of around 5–10%. Operating costs and management compensation also reduce intrinsic value: a firm holding $100 worth of Bitcoin but incurring meaningful expenses will naturally trade for less than the asset value. The final drag is execution risk, which captures the possibility of mismanagement or failed strategies. Hougan argues that while these discounts are virtually guaranteed, the techniques that could justify trading above asset value—such as raising debt, lending coins to earn interest, using options, or buying additional crypto at advantageous prices—are complicated and can introduce new risks. Larger firms, he notes, have an edge because they can use their scale to access financing and implement these strategies more effectively.
Hougan’s assessment comes at a time when investors are increasingly favoring regulated spot exchange-traded funds as a simpler way to gain exposure to digital assets. Nate Geraci of The ETF Institute recently characterized spot crypto ETFs as effectively rendering many DAT models obsolete. Bloomberg’s Eric Balchunas made a similar point, observing that although long-standing players like MicroStrategy still serve institutions limited to equity markets, most DATs are likely to find it difficult to match the performance and efficiency of ETFs tied directly to underlying crypto prices.
Against this backdrop, MicroStrategy—the most prominent firm in the category—has experienced sharp selling, with its share price falling roughly 60% from its highs in mid-July even as Bitcoin trades near $81,000. Despite this pullback, the company recently released figures underscoring the durability of its financial position. It estimates that it could continue meeting dividend-related obligations for more than seventy years even if Bitcoin’s price does not rise. Management also indicated that an annual Bitcoin price increase of just above 1.4% would be enough to fully support its nearly $700 million in yearly liabilities.
Market strategists remain generally positive on the company’s long-term approach of using leverage to increase Bitcoin exposure. Commentators including Charles Hoskinson have suggested that Bitcoin could reach around $250,000 by late 2026, which would likely fuel a strong recovery in the stock. Analyst consensus currently rates the company as a “Strong Buy,” with average price targets near $542—more than triple current levels. This indicates that while the DAT sector as a whole faces the structural challenges highlighted by Bitwise, the largest and most established players may still present meaningful opportunities for investors willing to tolerate substantial volatility.
