In a significant decision, Founders Fund, which counts Peter Thiel among its prominent supporters, has divested its entire interest in ETHZilla, a notable player in the Ethereum-based digital asset treasury sector. The exit, noted in a 13G filing with the U.S. Securities and Exchange Commission (SEC), marks an end to the fund’s noteworthy involvement in the company. Thiel and his investment firm have been pivotal in shaping various technology and cryptocurrency ventures across Silicon Valley, with their prior investment bolstering ETHZilla’s credibility in the crypto sphere.
What Impact Did the Sale Have on ETHZilla’s Share Price?
The divestment comes after Founders Fund’s entrance into ETHZilla significantly boosted the company’s stock, leading to nearly a 90% increase. After offloading its complete 7.5% stake, ETHZilla witnessed a 7% drop in early trading, with shares plummeting to $3.20— a stark drop from a high of $107 last summer. This strategic move suggests a decline in institutional interest in the digital asset treasury business model.
Will ETHZilla’s New Strategy Succeed?
Yes, ETHZilla is shifting its focus from solely accumulating Ethereum to incorporating tokenized real-world assets such as mortgage loans and aircraft engines. This transition aims to leverage the blockchain to offer traditional financial products, thus broadening their business horizons. Recently, the company repurchased $40 million in ETH shares while also liquidating $74.5 million in ETH to manage liabilities. Currently, ETHZilla’s holdings include approximately 69,800 ETH, valued at $139 million at existing market rates.
The departure of Founders Fund reflects changing strategies among institutional players regarding risk and asset distribution in the crypto world. Despite continuing crypto investments elsewhere, the fund’s exit points to a strategic pivot specifically relating to ETHZilla.
ETHZilla’s scale and financial results trail those of other major digital asset firms. The firm’s significant buybacks and debt adjustments have reduced its resources, casting doubts on the viability of its long-term business model.
“The future viability of ETHZilla greatly relies on its capability to implement its new business model and harvest revenue from tokenized real-world assets,” experts comment.
Conversely, analysts interpret Founders Fund’s withdrawal as diminishing institutional backing for ETHZilla’s Ethereum-centered treasury structure. Nevertheless, the fund continues with investments in other crypto firms, indicating a realignment rather than a full retreat from the market.
The company’s future will depend not just on accumulating crypto but on the success of its real-world asset tokenization initiatives to capture and sustain market interest. ETHZilla’s transition will ultimately reveal whether it can regain institutional favor.
