DAT Mechanics Part 2 Now let’s consider the case where DATs have varying levels of leverage. In this case, a DAT levered or not could grief the other DATs of the same underlying by outright dumping the full underlying stash at the right time creating margin calls/cascades for everyone else and the scoop up the cheap underlying once everyone is forced to puked. While the initial DAT is out of the underlying, they are fully backing their stock price (net of slippage) with cash while everyone else gets washed out. This play is possible when the DATs have no leverage but it is harder to pull off. Now consider the case where a DAT holds the locked version of an underlying which it acquired either from PIPE direct contributions or purchased from large holders from PIPE cash contributions. If the discount on locked underlying is high, this is good for DAT equity shareholders, otherwise, it is bad for shareholders. Here we have to be precise about what mNAV means. mNAV only makes...
DAT Mechanics Part 1 Some folks saying this the next LUNA (it’s not). Others are saying there’s nothing to unwind (there is). Think carefully about the mechanics. A lot of these DATs have no leverage so there won’t be any forced selling from getting called on debt. Still there is an incentive to sell the underlying and buy the stock back to capture the arb and push mNAV up. But how much of an incentive is there and how far up should mNAV be. This largely depends on the underlying asset. In the case of BTC, there is one very large player (MSTR) and many much smaller players. So you could say that MSTR alone as a DAT drives BTC price. Since mNAV here is healthy and since the leverage is controlled well, you probably won’t see much selling of the underlying here. As a side note, it makes sense that the debt is at a safe level since Saylor got such a great deal against the buyers of the early converts since he was the only game in town selling crypto upside to fixed income...
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