Layer One: VanEck's AVAX thesis and the 'Cambrian explosion' of DATs

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by Steven Gates and Kelvin Sparks, Layer One brings you inside the conversations driving blockchain forward.

This week on the podcast we were joined by Matthew Sigel, Head of Digital Assets Research at VanEck, and Morgan Krupetsky, VP of Onchain Finance at Ava Labs, to discuss RWAs, institutional investment and the “Cambrian explosion” of crypto ETFs and DATs. In this week’s newsletter, we’re taking a look at the latest trends among those two investment vehicles throughout a turbulent year so far.

Market downside tests the DAT thesis, while weekly ETF outflows slow to $187 million

This week on the podcast, we talked with Matthew Sigel, Head of Digital Asset Research at investment management giant VanEck. VanEck is one of the major issuers at the forefront of advancing institutional exposure in Web3. Its lineup of US crypto ETFs covers Bitcoin, Ethereum, Solana and also stock indexes of major crypto infrastructure and development firms.

Last month, the firm also brought the very first spot Avalanche ETF to market, which trades on the Nasdaq under the ticker VAVX.

The net flows of such ETFs have become some of the most cited metrics in crypto market analysis. Last week saw a total $187 million in outflows, a major slowdown in comparison to the combined ~$3.4 billion logged across the fortnight prior. This came as Bitcoin crashed to $63,000 in its worst single day since 2022, continuing a downtrend which has coincided with some major institutions, including Goldman Sachs, trimming their crypto ETF balance sheets.

Digital asset treasury firms — devised as an alternative crypto exposure vehicle to ETFs — have felt this impact even more severely. Earlier this week, Solana treasury firm Upexi reported a $179 million loss, primarily from unrealized losses on its token holdings following SOL’s fall to a two-year low. The firm's own shares are down roughly 96% from all-time high, reached shortly after announcing its pivot to digital assets in May 2025.

The stress test of downside market volatility is bringing the basic viability of some DATs into question. Sigel argued that ETFs remain the superior product, with most DATs “just too volatile, too dependent on a couple of people making consistently accurate, timely calls of when to lever up and lever down.” Krupetsky, on the other hand, asserted that there remains a place for DATs which can sustain and justify their existence.

The fear among some analysts is that a sustained bear trend may force some of these firms, especially those with no clear revenue, to begin hurriedly offloading their holdings. Given the massive amount of assets they hold — currently in the region of $70 billion — a cascade of such selling could be a catalyst for a further downside. A report from Bloomberg last week posited that “narrative contagion” could deal a bigger blow than the financial impact, with investors losing faith in DATs as instruments for long-term accumulation and exposure.

It may be the case then, as Sigel suggested, that in five years time many of the crypto exposure vehicles born in this “Cambrian explosion” will no longer exist.

However, this needn’t necessarily mean a doomsday scenario of massive sell-offs and unwinding markets. A recent report from crypto VC Pantera Capital predicted a “brutal pruning” within the DAT space, with smaller firms being acquired by rivals and just one or two major players left within each specific ecosystem.

Podcast Recap: VanEck's AVAX thesis

In the Headlines: The stories driving the conversation this week

• Coinbase’s share price faced a drop this week after reports that CEO Brian Armstrong offloaded $545 million in stock over the past nine months. In an X post, VanEck’s Matthew Sigel shared data suggesting the billionaire exchange founder has sold roughly 1.5 million shares since last April. Armstrong, whose net worth is a reported $7.5 billion, still holds a 14% stake in the company.
• Michael Saylor’s Strategy acquired a further $90 million in BTC, despite its overall position remaining underwater. The firm holds a total of 714,644 BTC, or over 3.4% of the total supply, purchased for a total cost of $54.4 billion. Following sizeable quarterly loss reports, CEO Phong Le recently assured investors that the company has enough cash reserves (a reported $2.25 billion) that it could weather a BTC crash to as low as $8k.
• Fosun Wealth Holdings launched its own yield-bearing stablecoin this week. The Hong Kong-based firm rolled out the FUSD stablecoin on Avalanche C-chain, boasting institutional-grade execution and native yield derived from offchain money market funds. The firm's goal is to serve the Asian market with greater onchain liquidity, thereby bringing more TradFi assets from the region onchain.

Top of the Charts: DATs and ETFs together hold hundreds of billions in cryptoassets

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