The digital asset treasury bubble is reversing, as companies that were once focused on accumulating cryptocurrency are now selling digital assets to stabilize falling stock prices or decrease debt.
ETHZilla (ETHZ), a Nasdaq-listed company dedicated to building a reserve of ether, the second-largest cryptocurrency, reported late Friday that it has liquidated $74.5 million worth of tokens from its treasury. This marks the company’s second ETH sale.
The proceeds from this latest transaction aim to redeem outstanding senior secured convertible notes, as per a regulatory filing made on Friday.
The firm sold 24,291 ETH at an average price of $3,068, reducing its holdings to about 69,800 ETH valued at over $200 million.
On Monday, ETHZ shares dropped by 4% and have plummeted approximately 96% since their peak in August.
This latest action highlights the persistent challenges faced by digital asset treasuries. Numerous public companies that raised capital to purchase these digital assets earlier this year are now trading below the net asset value (NAV) of their holdings, as their stock prices have fallen more steeply than the underlying crypto values.
This discount complicates, if not entirely prevents, raising capital for additional crypto assets, prompting some companies to focus on managing liabilities by tapping into their cryptocurrency reserves instead.
Earlier in the fourth quarter, ETHZilla offloaded $40 million in ETH, using the funds for share buybacks. Nevertheless, the stock has continued to decline, currently trading below $7 compared to the $20 range when the October repurchase was announced.
The company indicated it may continue to pursue capital through ETH sales or equity offerings as it seeks to advance its business strategies.
Read more: BitMine purchases $300 million in ether, reaching a milestone of 4 million ETH in treasury
