The New Math of Crypto Treasury Companies

On 1 Jul, Nasdaq-listed FG Nexus – the ninth-largest corporate holder of Ether (ETH) with just over 40,000 ETH on its balance sheet – announced plans to exit its digital asset business to focus on real estate investments, becoming the latest digital asset treasury company to retreat from the strategy.

Meanwhile, Strategy – the company that pioneered the corporate crypto treasury strategy and the world's largest corporate holder of Bitcoin (BTC), with more than 847,000 BTC on its balance sheet – recently approved a plan allowing it to sell as much Bitcoin as it needs to keep the company afloat and paying dividends. 

The move, aimed at building cash reserves, funding dividends and buying back shares, marked an abrupt turnaround from its long-standing "never sell" approach.

Another sign of that pressure came from The Ether Machine's failed attempt to go public, illustrating how difficult it has become for newer crypto treasury companies to convince investors to back listed vehicles built around holding digital assets.

In some ways, digital asset treasury companies seem to be taking a path already taken by many listed crypto miners, which increasingly pivoted toward AI and high-performance computing when falling Bitcoin prices and weaker mining economics crushed their valuations. Some, such as Core Scientific, moved aggressively away from mining to AI infrastructure, while others, including IREN and HIVE adopted hybrid models that kept crypto exposure but added AI revenue streams. 

The risk for treasury companies is that public markets may prove just as unforgiving to single-asset crypto exposure when more lucrative narratives are on offer.

Public listings stall

Several publicly traded crypto treasury companies are already trading below the value of the digital assets they hold. FG Nexus, for instance, trades at about 0.28x its modified net asset value (mNAV), while Strategy trades at about 0.84x. This means both companies trade below the value of the digital assets on their balance sheets.

That backdrop helps explain why several crypto treasury companies, including The Ether Machine and ReserveOne, abandoned plans to go public this year. 

The Ether Machine was pitched as a public vehicle for institutional Ether exposure, combining a large ETH treasury with staking, restaking and decentralized finance (DeFi) strategies designed to generate additional yield. 

The company had planned to go public through a merger with special purpose acquisition company (SPAC) Dynamix Corp., with more than $1.5bn in committed financing, including over $800mn from investors such as Blockchain.com, Kraken, Pantera Capital and Electric Capital, alongside $170mn held in Dynamix's trust account.

But the collapse of its planned public listing in April left the company holding about 496,700 ETH without the stock-market liquidity it had hoped to secure at a time when crypto prices remain under pressure.

ReserveOne followed a similar path. The company had planned to go public through a roughly $1bn SPAC merger as a diversified crypto treasury vehicle, but the deal was terminated in June due to market conditions.

As of 19:33UTC on 2 Jul, ETH is trading at $1,701, down more than 43% since the start of the year.

Experts say the failed mergers highlight a growing challenge for these companies: convincing investors to pay extra for a stock that holds crypto when they can just buy the assets through exchange-traded funds (ETFs) or on their own.

The premium problem 

While weaker crypto markets likely played a role, experts say the challenges facing treasury companies run deeper than just market volatility.

"Pulling a $1.6bn deal on soft tape isn't investors saying they don't want ETH exposure. It's investors saying they won't pay a premium for it right now," Ben Nadareski, chief executive and co-founder of Solstice Labs, told Sandmark.

Nadareski said many crypto treasury companies trade at a value above the assets they hold. That premium allows them to issue new shares, raise more capital and buy additional digital assets. But when investor enthusiasm fades, that advantage can disappear. 

According to Nadareski, falling crypto prices can create a negative feedback loop for treasury companies, making it harder to raise capital just as their underlying assets are losing value. "When a software company's stock falls, its product still works," he said. "When a treasury company's stock falls, it falls alongside the exact asset that's supposed to back it, and the accretive share issuance that was the entire strategy becomes impossible right when you need it."

More than just holding crypto

Cancelled IPOs involving crypto treasury companies also highlight regulatory tension: the more they try to differentiate themselves from simple crypto holding vehicles, the harder it may become to avoid being treated as investment companies.

Chanté Eliaszadeh, founding principal of Astraea Counsel, a California-based digital asset law firm, said The Ether Machine is an "interesting case" because it pitched itself as an Ether yield company. While this distinction strengthens its value, it could also place companies under the Investment Company Act of 1940, which imposes stricter regulatory requirements on firms that are engaged in investing.

"A company can be deemed an 'investment company' if investment securities are too large a share of its assets, or if it is 'primarily engaged' in investing, she said. "If that line is crossed, the company has to register under the 1940 Act, a regime these companies are not built to live under."

The DAT race continues

Onchain data show public companies and governments collectively held more than 7.6mn ETH worth nearly $13bn on 2 Jul, representing about 6.3% of Ether's total supply.

BitMine Immersion is currently the largest holder with more than 5.6mn ETH, followed by SharpLink with roughly 869,000 ETH.

The figures suggest the market is not abandoning ETH treasury companies altogether. Instead, investors are seemingly becoming more selective about which firms can justify a premium over the value of the assets they hold.

"The strategy survives. The marginal entrant doesn't," Nadareski said. "The first movers with scale, a real premium, and index inclusion have a durable edge. The tenth ETH treasury company trying to go public through a SPAC in a weak market is a different and worse bet."