Ethereum treasuries, which currently hold approximately $22 billion worth of Ether across 71 firms, are facing significant challenges as market premiums have sharply declined. This downturn marks a pivotal shift from the previous “speculative phase” characterized by exuberant growth expectations to a more intense and cutthroat environment for investors.
This change is underscored by the collapse of premiums for shares in companies that hold Ether as a reserve asset. Previously, these premiums peaked at five times the value of their holdings during the summer. By September, however, this figure had plummeted to below one, suggesting that investors are now viewing these companies as mere wrappers for Ethereum itself rather than as growth opportunities riding the waves of crypto enthusiasm.
Among the 71 companies collectively holding over four million Ether, BitMine and SharpLink Gaming stand out as the largest treasuries, accounting for more than half of the market. Notably, many of these companies are now being valued below the actual worth of their crypto assets. This scenario is mirrored in the Bitcoin treasury space, where one in three public firms holding Bitcoin also trades below their premiums.
A key point of contention for Ethereum treasuries is their strategy for financing. Unlike many Bitcoin treasuries that often manage dilution risks through convertible debt, Ethereum treasuries are largely issuing new shares, leading to immediate dilution for existing shareholders. “They are doing straight up at-the-money equity offerings, immediately diluting shareholders,” explained Luke Nolan, a senior researcher in Ethereum at CoinShares. This approach is contributing to a growing discontent among investors who are also grappling with dilution issues in the Bitcoin sector.
Recent metrics provide a stark illustration of the situation. Seven out of 17 Ethereum treasuries are currently trading below their net asset value (mNAV), indicating that many investors are purchasing into companies at a discount relative to their crypto holdings. SharpLink Gaming, led by Ethereum co-founder Joe Lubin, is just below 1 on the mNAV scale, while other firms like ETHZilla and BTCS Inc. are trading at discounts of 20% and 30%, respectively.
Moreover, trading volumes for digital asset treasuries have sharply declined, dropping 55% since their peak in mid-August. Factors contributing to this downturn include reduced interest in exchange-traded funds, a shift back into Bitcoin investments, and the rising popularity of alternative blockchain ecosystems like Solana and Avalanche.
Max Shannon, a senior research associate at Bitwise Asset Management, noted that Ethereum treasuries’ trading volumes have fallen below levels seen when BitMine initiated the Ethereum treasury trend. This diminishing interest is further exacerbating the struggles faced by these companies.
Looking ahead, analysts expect a wave of consolidation within the Ethereum treasury space, characterized by “winners take most” dynamics where a small number of dominant players will attract the bulk of flows, mimicking trends observed in Bitcoin treasuries. Despite these challenges, some experts believe that Ethereum treasuries have a lower risk of catastrophic failure than their Bitcoin counterparts, given their lesser exposure to outstanding interest payments that could trigger liquidation events.
For momentum to return to Ethereum treasuries, positive movement in the broader Ethereum market will be essential, ideally leading to a resurgence in interest and activity as the cryptocurrency approaches prior all-time highs.
