The once-popular cryptocurrency hoarding strategy that dominated the market earlier this year is now facing a turning point.
According to filings submitted to the U.S. Securities and Exchange Commission (SEC) on Friday, ETHZilla, backed by billionaire Peter Thiel, has sold $74.5 million worth of Ethereum tokens to repay debt. Meanwhile, Strategy, the pioneer of this model, paused its Bitcoin purchases this week to bolster cash reserves.
ETHZilla stated in the filing that it will continue evaluating various financing strategies, including Ethereum sales and equity financing. This marks the company's second Ethereum sale in four months, following a $40 million disposal in late October for stock buybacks.
Concurrently, Strategy founder Michael Saylor increased the company's cash reserves to $2.19 billion over the past week while halting Bitcoin acquisitions. The company previously indicated it was building cash reserves to service high-interest obligations from securities offerings. TD Cowen analyst Lance Vitanza estimates Strategy faces approximately $824 million in annual interest and dividend payments.
These developments suggest the business model of hoarding cryptocurrencies through public companies is under pressure. Bitcoin has fallen about 30% since early October's all-time high, while Strategy's stock has plunged over 50% during the same period.
ETHZilla's Pivot: From Accumulation to Liquidation
Just four months ago, ETHZilla was an enthusiastic follower of digital asset treasury strategies. Formerly known as 180 Life Sciences Corp., the Palm Beach-based company announced its transformation from biotech to an Ethereum-focused digital asset manager on August 18. Its shares had surged from $30 pre-announcement to over $100.
However, the optimism proved short-lived. Monday's SEC filing revealed ETHZilla sold $74.5 million in Ethereum to repay senior secured convertible notes. As of December 19, the company holds about 69,800 Ethereum tokens worth approximately $210 million at current prices. ETHZilla shares fell 7.5% to $6.38 in Monday afternoon trading.
The company stated it will continue assessing financing options including further Ethereum sales and equity offerings to fund its business plans, including real-world asset tokenization. ETHZilla's spokesperson declined to comment beyond the filing.
Strategy Presses Pause, Builds War Chest
The originator of this business model has also hit the brakes. Monday's SEC filing showed Strategy raised $748 million through common stock sales in the week ending December 21, boosting cash reserves to $2.19 billion while suspending Bitcoin purchases. This follows $2 billion in Bitcoin acquisitions over the prior two weeks, bringing total holdings to about $60 billion.
Earlier this month, Strategy established a $1.4 billion reserve for future dividends and interest payments, attempting to ease market concerns about potential forced Bitcoin sales during the token's price decline. TD Cowen's analysis shows the company's software business generates insufficient free cash flow to cover its $824 million annual interest and dividend obligations, while Bitcoin itself pays no dividends.
Business Model Under Scrutiny
Strategy's public company Bitcoin hoarding strategy inspired dozens of imitators earlier this year. ETHZilla followed this playbook, rebranding as an Ethereum treasury company. However, the model struggles to answer why tokens should inherently become more valuable simply by being held on corporate balance sheets—especially after cryptocurrency prices collapsed from October peaks.
As the crypto winter persists, the sustainability of this approach faces serious challenges. Peter Thiel maintains multiple cryptocurrency investments beyond ETHZilla, including early backing for exchange Bullish. His crypto-friendly banking startup Erebor is reportedly seeking $350 million at a $4.35 billion valuation.
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