According to analysis by Tom Lee of Fundstrat Global Advisors, the decline in inflows to Digital Asset Trusts (DAT) has significantly worsened following the liquidity shock from October 10 to 11. During that period, market makers' balance sheets were damaged, leading to a substantial contraction of order books and triggering capital withdrawals, creating a vicious cycle: buying freezes and continuous outflows. The liquidity of market makers is closely related to the net asset value (NAV) discount rate. Once market makers withdraw, the bid-ask spread widens and order depth shrinks, making it difficult for issuers to raise new capital at or above net asset value. When fund shares consistently trade below the actual value of underlying assets, the willingness to issue new products will be severely suppressed.
Matt Hougan, Chief Investment Officer at Bitwise, pointed out that the industry is heading towards a more pronounced differentiation: a few high-quality digital asset trusts are likely to continue trading at a premium, while the majority may fall into a long-term discount predicament. This trend indicates that the quality of liquidity and trading execution efficiency are becoming key factors in determining relative asset valuations.
Ki Young Ju, founder of CryptoQuant, added that liquidity risk is particularly pronounced in altcoin projects lacking DAT or ETF support. Assets without institutional backing are more susceptible to sudden liquidity exhaustion during market volatility.
To reverse the current outflow of funds, the market needs to see a narrowing of bid-ask spreads, a recovery in order book depth, and asset prices gradually returning to fair value. Until these conditions improve, the digital asset trust market will continue to exhibit a polarized and cautious wait-and-see pattern.