Concerns are growing about the viability of corporate crypto-treasuries as BlackRock moves forward with an Ether fund that analysts say could directly compete with existing digital asset treasuries.
BitMine Immersion Technologies, the world’s largest corporate Ether (ETH) holder, is currently down $1,000 per ETH purchased, implying a cumulative unrealized loss of $3.7 billion on its total holdings, according to research published on Thursday. report from crypto insights firm 10x Research.
Falling net asset values (NAVs) in these companies make it difficult to attract new retail investors, while leaving many existing shareholders effectively “trapped” unless they sell at heavy losses, 10x Research founder Markus Thielen wrote in a post on LinkedIn.
“When the premium inevitably drops to zero, as is happening now, investors find themselves trapped in the structure, unable to exit without significant damage, a true Hotel California scenario,” he said. He added that unlike exchange-traded funds (ETFs), digital asset treasury companies, or DATs, “the layer consists of complex, opaque and often hedge fund-like fee structures that can quietly erode returns.”
Related: BlackRock Leads November Bitcoin ETF Outflow of Nearly $3B With Record Outflows of $523M
The mNAV ratio compares a company’s enterprise value to the value of its crypto holdings. An mNAV above 1 allows the company to raise funds by issuing new shares to accumulate digital assets. Values below 1 make it much more difficult to expand capital and property.
BitMine’s basic mNAV was 0.77 while its diluted mNAV was 0.92, according to data from Bitminetracker.
BitMine holds approximately 3.56 million ETH worth approximately $10.7 billion, representing 2.94% of the total Ether supply. The company’s average cost base is $4.051 per ETH.
Other DATs also suffered sharp declines in their mNAVs, including Strategy, Bitmine, Metaplanet, Sharplink Gaming, Upexi and DeFi Development Corp.
Related: Strategy overcomes Bitcoin decline, still on track for S&P 500 spot: Matrixport
BlackRock enters with cheaper competition
BlackRock has registered a new offering of a leveraged Ether ETF in Delaware, marking the first step for the $13.5 trillion asset management giant to diversify into Ethereum-based products, Cointelegraph reported earlier Thursday.
BlackRock’s proposed Ether ETF could offer another low-cost, yield-generating fund without the hidden costs associated with traditional treasury firms. This development could threaten DAT’s profitability, according to 10x Research.
“With BlackRock now seeking approval to invest ETH in its ETF, offering a low-cost source of yield, the economics of DATs are likely to face increasing scrutiny,” the research note said.
More investors may start to shift towards a potential invested Ether fund from BlackRock when they realize that the 0.25% management fee is far less compared to the embedded costs of DAT, according to 10X.
Asset managers REX-Osprey and Grayscale have already launched leveraged ETH ETF products in September and October.
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