Retail Investors in DAT More Likely to Lose Funds After $17B Market Wipeout: Bloomberg

The losses to retail investors in these types of Digital Asset Trust (DAT) structures could continue to rise as billions of dollars in crypto market value keep declining. According to recent estimates, more than $17 billion in value has already been wiped out.

### DAT Strategies Leave Retail Traders Holding the Bag

A Bloomberg analysis suggests that retail traders have witnessed lower returns on investment due to the recent market changes. Investor trust is beginning to shake in these vehicles, especially as Bitcoin fell below $100,000. Many DATs that once traded at a premium are now trading below their net asset value.

“These structures can function like circular trades,” said Chris Holland of HM. “If liquidity is ever truly tested, retail investors may be left holding the losses the structure was meant to avoid,” he added.

A significant selloff, similar to what happened in October, sent many of these in-kind vehicles downward. According to 10X Research, retail investors have absorbed at least $17 billion in losses after investing in DAT equities modeled after Michael Saylor’s strategy.

Meanwhile, sponsors are increasingly turning to in-kind contributions, where they deposit their own tokens instead of raising fiat currency to buy assets on the open market. Usually, these tokens are unlisted or highly illiquid, which may shift how risk is allocated. Often, what seems like a capital inflow is merely recycled funds. However, when markets turn, the fallout could severely impact shareholders—mainly retail traders.

### Projects That Priced Out Their Public Backers

One example of this trend is Flora Growth Corp. In September, the company announced a $401 million DAT linked to Zero Gravity tokens. However, only $35 million of that amount was in cash; the rest consisted of tokens valued at $3 each. After listing, those tokens plummeted to nearly $1.20 each. This sharp decline undermined the deal’s equity structure, and Flora Growth shares have since tanked by more than 65%.

Similarly, Alt5 Sigma raised $1.5 billion to purchase World Liberty Financial (WLFI) tokens. Half of that was composed of WLFI tokens priced at $0.20 before they were publicly traded. Both companies have seen notable drops in their stock prices since beginning these treasury operations.

Tharimmune also raised $545 million, with 80% of the funds in unlisted Canton tokens. When the token finally hit exchanges, it fell almost 50%, dragging investor equity down alongside it.

As one analyst observed, “an 80% in-kind DAT is effectively a thin equity wrapper around a single volatile token.”

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The growing reliance on in-kind contributions and the volatile nature of these underlying tokens highlights the risks retail investors face. With many DATs trading below net asset value, investors must exercise caution and thoroughly evaluate these structures before committing capital.
https://bitcoinethereumnews.com/tech/retail-investors-in-dat-more-likely-to-lose-funds-after-17b-market-wipeout-bloomberg/

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