Concerns are escalating regarding the viability of corporate crypto-treasury firms as BlackRock advances with its staked Ether ETF, which analysts believe could directly compete with existing digital-asset treasuries. BitMine Immersion Technologies, recognized as the largest corporate holder of Ether (ETH), is reportedly down $1,000 for each purchased ETH, leading to an overall unrealized loss of $3.7 billion on its holdings, as per a recent report by 10x Research.
The decline in the net asset value (NAV) across various corporate treasury firms is creating challenges in attracting new retail investors while many current shareholders feel “trapped,” unless they are willing to incur substantial losses. Markus Thielen, founder of 10x Research, expressed in a LinkedIn post that as the premium continues to dwindle towards zero, investors become ensnared in these structures with limited exit options, likening the situation to a “Hotel California” predicament.
Thielen pointed out that, in contrast to exchange-traded funds (ETFs), digital-asset treasury companies (DATs) impose intricate, non-transparent, and frequently hedge-fund-like fee structures that can subtly diminish returns.
In terms of financial metrics, the mNAV ratio, which assesses a company”s enterprise value against its crypto asset value, reveals critical insights. A basic mNAV exceeding 1 enables a firm to raise capital by issuing new shares to acquire digital assets, while a ratio below 1 complicates efforts to expand capital and holdings. Currently, BitMine”s basic mNAV is at 0.77, with a diluted mNAV of 0.92.
BitMine”s holdings encompass approximately 3.56 million ETH, valued at about $10.7 billion, which constitutes 2.94% of the total supply of Ether. The average cost basis for BitMine is reported at $4,051 per ETH. Other DATs have also experienced significant reductions in their mNAVs.
In a broader market context, BlackRock is stepping into the arena with lower-cost competition, having filed for a new staked Ether ETF in Delaware. This marks the initial move for the $13.5 trillion asset management giant into Ethereum-related products, as reported by Cointelegraph. The proposed ETF could present an alternative low-cost option for yield generation, lacking the hidden expenses linked with traditional treasury firms. According to 10x Research, this development may put pressure on the economic models of DATs.
As investors become aware of the substantially lower management fee of 0.25% associated with BlackRock“s ETF compared to the embedded costs of DATs, a shift in investment strategies is likely. Other asset managers such as REX-Osprey and Grayscale have already introduced their staked ETH ETF products in recent months.
