Columbia Professor Highlights Risks of Digital Asset Treasuries

A professor from Columbia University has expressed concerns that numerous Digital Asset Treasuries (DATs) were established merely as schemes for quick financial gain. Omid Malekan highlights that these DATs contribute to the downturn in crypto prices, as they led to mass extraction events in the market.

Malekan points out that while a few DATs might be exceptions, the majority have negatively impacted the value of cryptocurrencies. He asserts that many initiating these ventures perceived them as quick profit opportunities.

Inside the DAT Frenzy

According to Malekan, investor presentations often lacked critical transparency, relied on vague buzzwords, and failed to disclose vital information, including payment sources. In a recent tweet, he remarked on the transparency issues surrounding the launches of these entities.

He noted that launching a public entity incurs significant expenses, with costs for shell companies and advisory agreements that are rarely disclosed. Malekan highlighted the conflicts of interest inherent in DATs, particularly when founders or venture capitalists are positioned on boards, redirecting funds into their startups.

Malekan emphasized that the primary harm caused by DATs is the facilitation of mass exits for tokens that were supposedly locked, which he finds astonishing that it hasn’t raised more alarm among investors. He argues that the overall supply of many altcoins is more substantial than expected, explaining that the easiest supply to discount is the unexpected increase.

VanEck Raises Concerns About DATs

Recently, the investment management firm VanEck warned about the inherent risks of the DAT model, stating that it directly hinges on market volatility, which is on a declining trend due to growing adoption of Bitcoin. They outlined that for a DAT to be successful, it requires ongoing volatility to finance asset purchases, cautioning that the downward trend in market fluctuations threatens this model’s viability.

Tags: Bitcoin (BTC) Price