Crypto Firms Raise Billions for Treasuries, But Aren’t Really Buying Crypto: Report

A growing number of publicly traded companies are raising hundreds of millions of dollars to build crypto treasuries, but one analyst says many aren’t actually buying digital assets from the open market.

The crypto treasury trend took off after MicroStrategy’s headline-making Bitcoin purchases in 2020.

Since then, companies like SharpLink Gaming, Upexi, and GameStop have announced multi-million or even billion-dollar fundraising efforts to build Ethereum, Solana, or Bitcoin treasuries. Yet, crypto prices remain relatively stable despite this supposed influx of demand.

Crypto Treasuries Are Just Exit Vehicles for Insiders

Talking to Forbes, crypto analyst Ran Neuner claimed that crypto treasury firms are acting less like buyers and more like exit vehicles for crypto insiders.

Instead of purchasing assets directly from exchanges, these companies often receive crypto contributions from existing holders, in exchange for shares that later trade at massive premiums on public markets.

For example, SharpLink’s $425 million Ethereum treasury wasn’t funded by institutions. According to Neuner, crypto holders contributed ETH in return for shares at net asset value.

Once the company publicly declared itself an Ethereum treasury firm, the stock surged, giving early contributors a chance to cash out with significant upside.

“As soon as we announce to the market that this company is an ETH treasury company, the shares that you got at net asset value are going to be worth three times net asset value,” he said.

https://twitter.com/gametheorizing/status/1946162921844756985

It’s a pattern that’s repeated across other firms. Upexi raised over $300 million while claiming to have acquired 1.9 million SOL.

Bit Origin wants to raise $500 million for Dogecoin. GameStop allegedly converted $1.5 billion in debt into Bitcoin.

Neuner said little of that activity appears to come from actual market buying.

The underlying model benefits insiders as they get liquidity, regulatory legitimacy, and tax efficiency — all while avoiding the price impact of selling on exchanges.

Meanwhile, retail investors often end up paying 2-4x the net asset value for these stocks.

Neuner warned that this is like a new form of leverage in crypto. Like past bubbles, he believes this treasury craze may burst just as suddenly.

Doubts Grow Over Long-Term Viability of Bitcoin Treasury Strategy

Skepticism around the sustainability of the Bitcoin treasury trend is growing.

Last month, Glassnode lead analyst James Check raised concerns over the longevity of the corporate Bitcoin treasury strategy, arguing the easy gains might already be gone for new entrants as the market matures.

The warning echoes recent comments from Matthew Sigel, head of digital asset research at VanEck, who has voiced concerns over the Bitcoin treasury strategies adopted by some publicly traded firms.

Sigel singled out the use of at-the-market (ATM) share issuance programs, arguing that these can become dilutive if a company’s stock price nears its Bitcoin net asset value (NAV).