Yield-chasing ETH treasury firms are most at risk: Sharplink Gaming CEO

Companies that buy and hold Ether to try to squeeze the most yield out of their holdings will be significantly more at risk if the market declines, says Sharplink Gaming co-CEO Joseph Chalom.

“There will be people just like in traditional finance who wanna get that last 100 basis points of yield, and think that it is riskless,” Chalom said in an interview with Bankless on Monday

He said that while there are ways to achieve double-digit yields on Ether (ETH), they come with significant risks

“It comes with credit risk, it comes with counterparty risk, it comes with duration risk, it comes with smart contract risk,” he said, adding that companies that try to make up lost ground also present a real risk.

“I think the biggest risk is that people who are far behind are going to take risks that I don’t think are prudent.”

Wider industry could be tainted by “imprudent” moves

Chalom said the sector “could be tainted by people that do imprudent things,” such as how they go about raising capital or differentiating themselves in the yield that they derive from their ETH holdings.

“If you overbuild and there is a downturn, how do you make sure your call structure is in such a way that you build to the highest price of Ethereum?” he said.

Sharplink Gaming is the second-largest public holder of ETH, with $3.6 billion worth, trailing only behind BitMine Immersion Technologies, which holds $8.03 billion

The top 10 Ether treasury companies by holdings. Source: StrategicETHReserveETH treasury companies hold approximately 3.6 million ETH worth approximately $15.46 billion at the time of publication, according to StrategicETHReserve data.

Some see the model as having dire consequences

Josip Rupena, CEO of lending platform Milo and former Goldman Sachs analyst, recently told Cointelegraph that crypto treasury firms pose similar risks as collateralized debt obligations (CDOs), securitized baskets of home mortgages and other types of debt that triggered the 2008 financial crisis.

On the other hand, Matt Hougan, chief investment officer at Bitwise, recently said that Ether treasury and holding companies have solved Ethereum’s narrative problem by packaging the digital asset in a way that traditional investors understand, drawing in more capital and accelerating adoption.

Related: Ether breaks below ‘Tom Lee’ trendline: Is a 10% incoming?

Chalom said that “the beautiful thing” about ETH treasury companies is that they are almost infinitely scalable. Ether is trading at $4,327 at the time of publication, according to CoinMarketCap.

Concerns about the broader crypto treasury model have been mounting in recent times.

Glassnode lead analyst James Check said in an X post on July 5 that his “instinct is the Bitcoin (BTC) treasury strategy has a far shorter lifespan than most expect.”

On June 29, venture capital (VC) firm Breed said only a few Bitcoin treasury companies will stand the test of time and avoid the vicious “death spiral” that will impact BTC holding companies that trade close to net asset value.

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