According to Cointelegraph, companies that invest in Ether (ETH) to maximize yield may face significant risks if the market experiences a downturn, warns Joseph Chalom, co-CEO of Sharplink Gaming. In a recent interview with Bankless, Chalom highlighted that while double-digit yields on Ether are achievable, they come with various risks, including credit, counterparty, duration, and smart contract risks. He emphasized that companies attempting to recover losses might engage in risky behavior, which he considers imprudent.
Chalom expressed concerns that the broader industry could be negatively impacted by such imprudent actions, particularly in how companies raise capital or differentiate themselves through the yields derived from their ETH holdings. He questioned the sustainability of business models that overbuild during market upswings, asking how they would manage if Ethereum's price declines. Sharplink Gaming, the second-largest public holder of ETH with $3.6 billion, follows BitMine Immersion Technologies, which holds $8.03 billion. Data from StrategicETHReserve indicates that ETH treasury companies collectively hold around 3.6 million ETH, valued at approximately $15.46 billion.
The crypto treasury model has drawn mixed reactions from industry experts. Josip Rupena, CEO of lending platform Milo and a former Goldman Sachs analyst, compared the risks posed by crypto treasury firms to those of collateralized debt obligations (CDOs), which contributed to the 2008 financial crisis. Conversely, Matt Hougan, chief investment officer at Bitwise, argued that Ether treasury and holding companies have effectively addressed Ethereum's narrative problem by making the digital asset more accessible to traditional investors, thereby attracting more capital and accelerating adoption. Chalom noted the scalability of ETH treasury companies, with Ether trading at $4,327 at the time of publication, according to CoinMarketCap.
Concerns about the crypto treasury model have been growing. Glassnode lead analyst James Check expressed skepticism about the longevity of Bitcoin (BTC) treasury strategies in a social media post on July 5. Additionally, venture capital firm Breed warned on June 29 that only a few Bitcoin treasury companies would endure over time, avoiding the "death spiral" that could affect BTC holding companies trading near net asset value.
