TBW - Why Peter Thiel left ETHZilla
The last quarter left no room for ambiguity: market sentiment towards digital assets remains lacklustre. But it is for Digital Asset Treasuries (DATs) that the storm is most violent. While Bitcoin accumulation strategies are still putting up resistance, the market valuations of these players remain heavily depressed.
What's to blame? The disappointing performance of the underlying assets, but above all the fragility of business models which, beyond credit products linked to BTC, are struggling to demonstrate their organic viability.
The ETHZilla case: autopsy of a disenchantment
The DAT segment exposed to Ethereum is going through an even more marked phase of depression. The symbol of this slump is the total withdrawal of Peter Thiel and his Founders Fund from ETHZilla's capital.
As a reminder, Founders Fund had accumulated a 7.5% stake last August, propelling the stock to a high of $174 at the time. Since then, confidence has evaporated. As investors became increasingly aware of the risks inherent in these structures, the share price collapsed by almost 98%.
Once holding 102,000 ETH (its all-time high), ETHZilla has had to scale back. The company has sold off a significant portion of its holdings to reduce its stock to 69,000 ETH (a 32% drop) in order to fund a share buyback programme and pay down increasingly burdensome convertible debt.
The performance impasse in the face of dilution
The problem is structural. Although ETHZilla generates cash flow via staking, the return obtained is insufficient to compensate for the dilution required to service the debt. The conclusion is mathematical: the company is not generating enough net profit to fuel the two pillars of the DAT model: accretion of ETH per share and repayment of creditors.
Why is Peter Thiel exiting now? Everything points to a losing bet on the durability of the "hype" surrounding these vehicles. Even more surprisingly, ETHZilla is now trying to pivot towards the tokenisation of real assets (RWAs) - mortgages, car loans and even aircraft engines. For the time being, the market is refusing to accept this move. This massive withdrawal from smart money confirms the end of a cycle and highlights a survival bias from which only a few players will emerge unscathed.
The Big Whale's opinion
The DAT market is structurally dependent on the price of the underlying assets. Without business lines capable of generating cash flow outside of debt issuance, these structures become anchors as soon as the euphoric phase fades.
In the event of a prolonged bear market, the issue of debt refinancing would become central. With shares trading well below their net asset value (NAV), these entities have only one option left: sell their tokens to pay the interest. This is the end of the positive "flywheel": the flywheel has reversed, turning what was a growth accelerator into a forced liquidation mechanism.
>> Report - Digital Assets Treasuries (DATs): a good bet, really?
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