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- Ethereum co-founder cautions that excessive leverage by treasury firms could lead to a massive liquidation which could affect the integrity of the ecosystem.
- According to the co-founder, the people who work in Ethereum, as well as those in the Treasury firms, are responsible enough to operate with the right leverage.
The rising trend of publicly traded companies buying and holding Ethereum (ETH) on their balance sheet has indirectly increased ETH’s access to retail and institutional clients who are unable to directly hold the asset. According to reports, these Ethereum treasury firms also operate as a bridge between traditional finance and decentralized finance firms.
Vitalik Buterin Cautions ETH Treasury Firms
In a recent Questions and Answers session, Ethereum co-founder Vitalik Buterin likened their operations to Bitcoin-focused firms like MicroStrategy. While he admits that these firms boost the ecosystem reach and add an extra layer of legitimacy to the project, he believes that the provision of excessive leverage could break the ecosystem.
If you woke me up 3 years from now and told me that treasuries led to the downfall of ETH… my guess would be that they turned into an overleveraged game.
Explaining this in a short video shared on X, Vitalik highlighted that this situation could jeopardize the reputation and credibility of the project. However, he appeared unfazed as he believes the people in Ethereum and the treasury firms are responsible enough to tread on a safer path.
According to Vitalik, “these people are not Do Kwon” followers. Henceforth, they would operate with the right level of leverage.
For context, Do Kwon is the co-founder and CEO of Terraform Labs. In a press release published by the US Department of Justice and reviewed by CNF, Do Kwon was accused of engaging in market manipulation, defrauding investors through false advertisement, and contributing to $40 billion loss of investors’ funds.
Vitalik’s latest assertion follows his earlier suggestions prioritizing decentralization and stability over 100x speed gains, as explained in our previous blog post.
Growing Trend of Ethereum (ETH) Treasuries
Data suggests that the amount of ETH held by these Treasury firms is cumulatively around $11.77 billion. Specifically, BitMine Immersion Technologies is reported to hold 833,000 ETH, while The Ether Machine holds $1.34 billion worth of the asset.
As recently indicated in our news brief, SharpLink offered up to $1 billion in common stocks to increase its ETH holdings. According to reports, it has about $2 billion in ETH exposure.
In a July 23 report, CNF also highlighted that ETH Exchange Traded Funds (ETFs) and corporate treasuries had accumulated about 2.83 million ETH ($10 billion at that time). According to Bitwise Chief Investment Officer Matt Hougan, this could have a massive impact on the price in the short term.
At the time of writing, ETH was trading at $3,900 after printing gains across all the major trading sessions. In the last 24 hours, the asset has surged by 5%, increasing its weekly gains to 8% and monthly gains to 49%. As highlighted in our last analysis, ETH is expected to hit $10k this cycle with an Ethereum Community Foundation established to make this a reality.
