Welcome back to Forward Guidance. Ben’s a little under the weather today, so we’ve brought in Donovan Choy from the Lightspeed newsletter to unpack some of the reasons why digital asset treasury companies’ mNAVs are faring so poorly. Enjoy!

The state of DATs, post Oct. 10

We’re 10 days removed from Oct. 10’s severe crypto liquidation which saw more than $20 billion in leveraged positions being wiped out.

A lot of commentators are proclaiming that alt season and DATs are dead, so let’s check in on how DATs are faring today.

DATs were a primary driver of this year’s bull market flows. As of today, DATs collectively hold 3.93% of ETH, 3.49% of BTC and 2.59% of SOL in circulation.

If they fail to rebound, the bull cycle may be over; if they recover, the DAT playbook of raising more equity and acquiring tokens could still be viable.

Lightspeed is a Solana newsletter, so let’s look at Solana first. The chart below shows the difference in mNAVs (market cap divided by asset holdings) from the Oct. 10 crash to last Friday’s close.

Forward Industries (FORD) remains the lone winner: Its mNAV has risen from 1.20 to 1.42.

Five days after the crash, on Oct. 15, the analytics platform Lookonchain sparked fears of an impending SOL selloff after reporting that Forward had deposited ~14% of its SOL holdings ($192 million) to Coinbase and Galaxy. Forward promptly issued a press release stating that all 6,871,599 SOL in its treasury was intact, with the vast majority delegated to validators.

Outside of Forward, there’s no sugarcoating the reality: mNAVs aren’t looking great.

Most other DATs have sold off — most notably the Pantera and Summer Capital-backed “Solana Company” (HSDT), whose mNAV fell from 1.27 to 0.96. Smaller Solana-focused DATs such as Sharps Technology (STSS) and Upexi (UPXI) are also seeing further mNAV compression.

The picture looks similarly bleak in Ethereum world. The figures below show mNAV changes from the post-crash period to Friday’s closing.

The largest Ethereum DAT, Bitmine Immersion (BMNR), saw modest mNAV compression from 1.24 to 1.18, just barely above 1.

Smaller Ethereum DATs including Peter Thiel’s ETHZilla Corporation (ETHZ), FG Nexus (FGNX) and BTCS Inc. (BTCS) were already trading at below 1 mNAVs before Oct. 10 and have declined further.

The Consensys-backed Sharplink Gaming (SBET) was the sole outlier, seeing a growth in mNAV from 0.84 to 0.92, yet it remains below 1.

As smaller DATs continue to see compressions of their mNAV multiples, consolidation looks increasingly likely.

The majority of DATs are trading at a discount to the value of its underlying assets, breaking the core “flywheel” that these treasury vehicles rely on.

Strategy’s (MSTR) mNAV is roughly unchanged from before the market crash, but it has continued to drift lower and remains well below its mNAV premiums of 1.5-2x earlier this year.

— Donovan Choy