Coin stock hidden story: halved method of slashing the slashing method hidden in equity dilution and mNAV algorithm

author:danny  Source: X,@agintender

There was Muramasa, the ancient demon sword village, and now there is a waist knife coin stock DAT – why has the coin stock DAT evolved into “official announcement”?!(Cutting in half? Or demon slash?) Did early investors smash the market?Is the market no longer paying for it?This is not a market failure or accidental panic, but a predictable and rational market repricing process.It marks the transition of market sentiment from a fanatical pursuit of a novel story to a calm scrutiny of the company’s financing mechanism, equity dilution and the real value of each share.

Part 1: Deconstruction of the “Coin Stock” DAT model of “Coin Stocks”

1.1. Definition and core logic: a bridge connecting the traditional finance and crypto world

In recent years, a new type of listed companies has quietly emerged at the intersection of cryptocurrencies and traditional finance, and investors usually call it “coin stocks” or “digital asset fiscal concept stocks”.In the field of professional finance, such companies are defined as “Digital Asset Treasury Companies (DAT).Its core business model is that these companies will strategically accumulate crypto assets (usually mainstream BTC/ETH/BNB/SOL) on their balance sheets as one of their core business functions.

Unlike traditional companies holding cryptocurrencies, DATs’ operating purpose is to actively and explicitly increase its holdings of crypto (digital) assets.In this way, they provide investors in traditional capital markets with a regulated, equity-based tool to gain exposure to crypto assets.This model serves a specific market demand: many large institutional investors, such as pension funds, sovereign wealth funds and endowments, cannot directly buy and hold cryptocurrencies due to internal compliance, custody complexity or regulatory restrictions.DATs’ shares traded on mainstream exchanges such as the New York Stock Exchange or Nask, providing a bridge of compliance for these restricted capitals to enter the crypto space.

The pioneer of this model was Strategy Inc. (formerly MicroStrategy) under Michael Saylor.Since 2020, the company has begun converting large amounts of cash reserves into BTC, setting a precedent for turning listed companies into BTC-holding tools.This move not only reshapes the market’s perception of how companies view BTC – from a purely speculative asset to a strategic reserve asset that can withstand the depreciation of fiat currencies – but also provides a replicable template for subsequent companies.

Since then, this trend has gradually spread to the world.For example, Japanese listed company Metaplanet has adopted a similar strategy, reflecting the same demand for such investment tools in capital markets in different regions.The emergence of these companies marks the increasingly integrated crypto assets from the edge to the mainstream and into the global macro-financial system.

Table 1: Overview of major cryptocurrency assets financial companies

Note: As of August 2025, market value and crypto asset holdings will fluctuate with the market.

1.2. Key Concepts and Value Propositions: Investors’ Professional Dictionary

To accurately evaluate “coin stocks”, investors must go beyond traditional indicators such as price-to-earnings ratio or price-to-book ratio and master a set of analytical vocabulary designed specifically for this model.These concepts are key to understanding their value propositions and inherent risks.

• Net Asset Value (NAV): This is the cornerstone of evaluating DAT, which refers to the total value of digital assets held by the company at the current market price.It represents the “real” intrinsic value of crypto assets on the company’s balance sheet.

• Equity Premium to NAV or mNAV: This is the core concept of understanding the valuation of “coin stocks”.It quantifies the premium of a company’s stock market value relative to its digital asset value per share.This indicator is usually expressed in multiples (mNAV, i.e. multiple of NAV).For example, if a company has an mNAV of 2.0x, it means its share price is twice the value of BTC per share.High mNAV reflects market optimism, expectations for the company’s future asset increase, the scarcity of stocks, and the convenience premium as a compliant investment vehicle.On the contrary, the contraction of mNAV indicates a weakening of market confidence.

• BTC yield (Bitcoin Yield or Crypto Yield): This is a key performance indicator (KPI) proposed and actively promoted by DATs management.It measures the growth rate of the amount of BTC (or other crypto assets) represented by a company per share (after completely diluted) over a specific period.The positive “BTC yield” means that the company purchases new assets through financing faster than the speed of equity dilution, causing the nominal share of BTC that each shareholder has to increase.However, this indicator needs to be reviewed critically.If the stock price drops sharply during the same period, even if the “BTC yield” is positive, shareholders’ actual wealth may suffer losses.Therefore, this indicator must be analyzed in combination with stock price performance and mNAV trends in order to fully evaluate its true value to shareholders.

1.3. A proxy tool with leverage: Comparison with BTC ETFs

With the approval of the 2024 US spot BTC ETF, investors have obtained tools to track BTC prices directly and at low cost.This makes the difference between DATs and ETFs particularly important because they provide investors with a very different risk-return experience.

• Active management vs. Passive tracking: The design purpose of ETF is to copy the price performance of its underlying asset (i.e. BTC) as accurately as possible, and is a passive investment tool.By contrast, DATs are proactively managed entities.Its management needs to make key decisions on capital allocation, financing timing, financing instrument selection (equity or debt), and asset purchase strategies.Investing in DAT is not only about investing in BTC, but also investing in the capital operation capabilities of its management team.

• Inline leverage effect: Investing in DAT stocks is essentially a leveraged bet on BTC.This leverage originates from two aspects: First, companies may raise funds to purchase BTC by issuing debt instruments such as bonds, which constitutes financial leverage.Secondly, mNAV premium itself has a leverage effect.When market sentiment is high, BTC price rises by 1%, which may drive DAT shares to rise by 2% or more, and vice versa.

• Unique risk exposure: The risks of ETFs are mainly concentrated in BTC’s own price fluctuations.On this basis, DATs are superimposed on the company-level specific risks, these wind-level execution risks, specific regulatory challenges faced by listed companies, and the most core – financing risks, namely the risks of equity dilution and debt refinancing.

To sum up, DATs are not simple “cryptocurrency holding companies” but should be regarded as a complex financial instrument.Through active capital market operations, they provide investors with leveraged exposure to cryptocurrencies such as BTC, but this also introduces multiple risks inherent in traditional equity investment and financial engineering.

Part 2: Capital Flywheel – Financing, Reflexivity and Market Influence

The core driving force of the DAT model lies in its unique financing mechanism, which can form a strong, self-reinforced positive feedback loop in a favorable market environment, namely the “capital flywheel”.However, this flywheel is also bidirectional, and its operating direction depends entirely on market sentiment and liquidity in the capital market.

2.1. Financing Engine: How Capital Is Created

DATs mainly raise funds for purchasing digital assets through two complex financial instruments.The exquisite design of these tools is that they can maximize the company’s high stock prices and market expectations for its future growth.

• At-the-Market Equity Programs, ATM: This is the most commonly used and most efficient financing method for DATs.The ATM plan (also very vivid, directly “withdrawal” from the market) allows companies to sell newly issued shares in batches and small amounts directly on the open market based on market conditions.This method is extremely flexible, avoiding the roadshow and discount issuance required for traditional large-scale additional issuances, but it is also the main reason why the existing shareholders’ shareholding ratio is diluted.

• Convertible Notes: This is a hybrid financing tool that is essentially a low-interest or zero-interest bond issued by a company, but comes with an option: Under certain conditions, bondholders have the right to convert the bond into company stocks.This is an attractive way to raise funds for companies because it can borrow a lot of money at interest rates that are well below market level.MicroStrategy, for example, has raised billions of dollars in multiple issues of convertible bonds with interest rates as low as 0% or 0.625%.For investors, this kind of bond provides asymmetric returns with “the downward guaranteed (at least the principal can be recovered) and the upward space (the stock price can be converted to profit when it rises).”However, this tool also laid the company’s future “diluted mines”: once the stock price rises sharply and exceeds the conversion price, a large number of bonds are converted into stocks, which will lead to a sharp expansion of the total equity capital.

2.2. “Flywheel Effect”: Amplifier for gains and losses

The operation of the DAT model perfectly interprets the “reflexivity” theory, that is, there is a dynamic feedback loop that affects and strengthens each other between the expectations of market participants and the fundamentals of the market.

Upward spiral (positive feedback in bull market): In a bull market, the flywheel will produce a strong positive driving force.The operating logic is as follows:

1. The rise in BTC prices has triggered optimistic expectations for DAT.

2. Optimistic expectations drive DAT stock price to rise with a higher beta coefficient (i.e., a larger gain), thus expanding its mNAV premium.

3. The high mNAV premium makes the company’s financing activities “value-added”.For example, a company can use $1.50 in the market to raise $1.50 in cash, then use that money to buy $1 worth of BTC and use the remaining $0.5 as a value-added to the company.

4. A large amount of funds raised through ATMs or issuing new bonds are used to purchase more BTC, which further increases the company’s net asset value (NAV).

5. The growth of the company’s assets and the continuous purchasing actions have in turn strengthened its market narrative as the “BTC growth engine”, attracting more investors, further pushing up the stock price and mNAV premium, thus completing a positive feedback loop.

Downward spiral (negative feedback in bear market): The fragility of this flywheel lies in its high dependence on market sentiment.Once the market turns bear, the flywheel will rotate rapidly inversely, forming a “death spiral”:

1. The decline in BTC prices has triggered pessimism in the market.

2. DAT’s stock price fell even more due to its high beta and leverage effects, causing the mNAV premium to shrink rapidly and even turn into a discount.

3. At this time, any financing through issuing new shares will be “impaired” (Dilutive), that is, the cash received from the sale of shares is not enough to compensate for the dilution of existing shareholders, which makes financing through ATMs impractical or extremely destructive.

4. The exhaustion of financing channels has broken the growth narrative of the company’s continued increase in BTC, causing investor confidence to collapse and stocks to be sold.

5. The further decline in stock prices has caused the company’s market value to be much lower than the BTC value it holds, and it has fallen into a serious discount, which has triggered a more violent sell-off and formed a vicious cycle.

Part 3: The mystery of DAT’s “official announcement is halved”: Multi-factor risk analysis

The phenomenon of stock prices plummeting after the official announcement of most “coin stocks” is not accidental fluctuations in market sentiment, but a concentrated reflection of the inherent risks of their business model.Behind this phenomenon is the result of the interweaving effect of multiple factors such as equity dilution, market psychology, leverage mechanism and valuation logic.The collapse of stock prices can be understood as the drastic transformation process of the market from the initial “narrative-driven valuation” to the more stringent “fundamental-driven valuation”.

3.1. Dilution Engine: Quantitative Analysis of MicroStrategy

Equity dilution is the inherent “original sin” of the DAT model and is also the key to understanding the long-term performance of its stock price.While company management tends to promote growth in its total assets, the only meaningful indicator for stock investors is the value of assets they own per share.

Take Strategy (MSTR), the pioneer and biggest practitioner of the model, as an example, the company’s total equity has experienced explosive growth since the implementation of the BTC strategy in 2020.Data shows that the number of fully diluted outstanding shares surged from about 97 million shares in the mid-2020 to more than 300 million shares in the mid-2025, an increase of more than 200%.This means that in order to raise funds to buy BTC, the company’s equity cake was cut into three times more than it was.

At the same time, the company’s BTC holdings have also increased from zero to more than 630,000.So, what impact does this race of “increasing holdings” and “dilution” ultimately have on shareholders’ BTC exposure per share?Through the data analysis in the table below, we can clearly see the answer.

Table 2: Equity Dilution and BTC Holdings Per Share by Strategy Inc. (MSTR) (2020–2025)

The above table clearly reveals a key trend: Although Strategy Inc.’s total BTC holdings continue to grow, its “BTC holdings per share” have experienced drastic volatility and have shown a significant downward trend in the near future.In the early stage of the strategy, the company’s BTC increase rate exceeded the equity dilution rate, resulting in an increase in BTC content per share.However, with the expansion of financing scale and fluctuations in stock prices, especially after entering 2025, large-scale equity financing has led to the growth rate of the denominator (number of outstanding shares) exceeding the growth rate of the numerator (BTC holdings), causing the actual content of BTC per share to begin to be diluted.

This quantitative result: Continuous equity financing, even in order to purchase promising assets, may cause actual value dilution to existing shareholders.When the market shifts from a fanatical worship of “total holdings” to a rational examination of “value per share”, downward correction of stock prices is inevitable.

3.2. The Psychology of Crash: Crowded Trading and Narrative Bankruptcy

The plunge in “coin stocks” is also a typical case of market psychology, with its core being “crowded trade” and the subsequent “narrative bankruptcy”.

Crowded trading refers to a large number of investors who concentrate on holding the same asset based on similar logic and strategies, thus creating endogenous risks – that is, the risk does not come from the fundamentals of the asset, but from the market structure itself.DATs fit perfectly into the characteristics of crowded trading: a simple, seductive narrative (“Next MicroStrategy”, “Leveraged BTC Stocks”) attracts a large influx of speculative capital with convergence.

This crowded structure laid the groundwork for the violent fluctuations in prices.Another user’s guess – “the early investment will be cashed out again” – pointed out the fuse for the collapse of crowded transactions.Early investors, especially institutions that enter at lower valuations through private equity (PIPE), have a strong incentive to sell stocks to lock in profits when the company officially announces its strategy and market sentiment reaches its peak.Their selling behavior constituted the first wave of selling pressure.

When the initial hype tumbles, market participants’ attention will shift from grand narratives to boring financial statements and SEC documents.At this time, investors will find that with each “successful” financing and BTC increase announcement, there are the continuous growth of outstanding equity and the continuously diluted value per share.This cognitive transformation from “story” to “digital” constitutes the core of “narrative bankruptcy”.Once the market realizes that there are flaws in the growth story that supports high premiums, crowded transactions will quickly reverse, forming a “step-by-step” escape, resulting in a cliff-like decline in the stock price.

3.3. Mechanics of fluctuations: Leverage and mandatory selling

The internal structure of the DAT model and the trading behavior of investors jointly amplify the volatility of stock prices.

First, financial leverage at the company level is the main source of volatility.By issuing bonds to purchase BTC, the company’s balance sheet is leveraged, which means its shareholders’ equity is more sensitive to changes in the price of the target asset.

Secondly, although DATs will not face “filing liquidation” like cryptocurrency derivatives, a similar risk of “mandatory deleveraging” still exists.When the stock price plummets and the mNAV premium shrinks sharply, the company’s ability to issue new shares through the ATM program will be severely weakened or even completely lost.Because the additional issuance of stocks at this time will be highly diluted, which is tantamount to “drinking poison to quench thirst”.The disruption of financing channels means the suspension of capital flywheel, which is a fatal blow to a company that relies on continuous financing to maintain its growth narrative.The market will interpret this as a major negative, which will trigger a more violent sell-off and form a self-reinforced negative feedback.

In addition, investors holding DAT stocks may also use leverage themselves (for example through brokerage margin accounts).When the stock price falls, these investors may face the requirement of margining, and if it cannot be met, their positions will be forced to close, which will put additional downward pressure on the stock price.

3.4. Evaporation of premium: Competition and market maturity

DATs stocks were able to enjoy extremely high mNAV premiums in the early stages, mainly due to their scarcity.Before the spot BTC ETFs came out, companies like MicroStrategy were one of the few channels that allowed a large number of regulated funds to hold BTC exposure in compliance.This unique market position brings it a significant “scarcity premium”.

However, this premium is unsustainable. In addition to the fact that the emergence of ETFs provides a digital currency investment method with lower cost, simpler structure and purer risks, the maturity of the market will also allow investors to transcend the superficial narrative of “increasing holdings of digital currency” and instead analyze its financing mechanism, dilution effect and leverage risks in depth.

Based on the above analysis, we can conclude that the currency stock DAT is a highly innovative but extremely risky financial tool.They have successfully built a bridge between the traditional capital market and the emerging crypto world, but the structure of this bridge is full of internal contradictions and instability.

Assuming that the early collapse is inevitable, how should we deal with it for investors?What strategies should be adopted?What are the algorithms and standards?Are there any successful cases in the market?What are their core competitive advantages?

If you want to know what happens next, please listen to the next breakdown.