According to Bernstein, companies are accumulating Ethereum (ETH) in their treasuries to earn staking rewards, but this model also carries distinct liquidity and smart contract risks compared to companies that focus solely on Bitcoin.
Liquidity and smart contract risks
Bernstein's analysts point out that staking $ETH to earn returns will face liquidity risks, as the unstaking process (withdrawing ETH from staking) can take several days. Therefore, ETH treasury companies must balance maintaining liquidity and optimizing returns. Furthermore, more complex return optimization strategies such as restaking (e.g., Eigenlayer) or yield generation based on DeFi will involve managing smart contract security risks.
Bernstein states: "The ETH treasury model has the benefit of real cash flow driving operating income; however, liquidity and security risks will be important considerations."
This report comes as the number of companies building Ethereum treasuries is increasing. #Bernstein notes that companies like SharpLink Gaming, Bit Digital, and BitMine Immersion have accumulated 876,000 ETH in July. BitMine Immersion has recently surpassed $2 billion in ETH holdings and aims to stake 5% of the total ETH supply.
Even though ETH has surpassed $3,900 and increased by over 50% in the past month, closely tied to the rise of ETH treasuries and the GENIUS Act, Bernstein warns that the ETH treasury model will require more complex risk management compared to the Strategy (MicroStrategy) model with Bitcoin, which focuses on keeping Bitcoin liquid on the balance sheet without lending for yield.