- SharpLink CEO Joseph Chalom warned about the risks that yield-chasing Ethereum treasury companies will face during a market downturn.
- Their company is currently the second-largest public entity in terms of ETH treasury.
Ethereum (ETH) currently experiences an unprecedented level of institutional adoption. The trend is mainly due to its utility as a yield-bearing asset from staking and vast use in decentralized finance (DeFi) protocols. These features elevate it from Bitcoin (BTC), which limits its use case in wealth preservation and long-term price appreciation.
One of the powerhouses in the Ether treasury race right now is SharpLink Gaming. According to StrategicETHReserve, a website tracking the top public companies with Ether strategic reserves, the online betting entity holds 837.23K Ether with a current value of $3.61 billion as ETH trades around $4,300 this Wednesday. Its stash is only second to Bitmine Immersion Tech’s 1.84 million ETH holdings valued at $8.04 billion.
However, the company’s CEO, Joseph Chalom, has released a stark reminder of the inherent risks in the Ether treasury sector.
Risks for Big Ethereum Holders
In an interview with Bankless, Chalom discussed that companies and people holding a big chunk of ETH merely for yields have the most risk if the market undergoes deeper corrections.
“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,” said the exec. He highlighted credit, counterparty, duration, and smart contract risks as factors that these holders must grapple with. Additionally, he emphasized that those coming in late to the party, or those trading on FOMO (Fear of Missing Out), will shoulder the highest risk.
Chalom warned the sector “could be tainted by people who do imprudent things.” Companies or people employing aggressive strategies to differentiate themselves from the rest and entice more investors could amplify risks in the market.
“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?” Chalom pointed out.
Nevertheless, the SharpLink CEO underscored “the beautiful thing” about Ether treasury companies. He explained that they are infinitely scalable.
The Ethereum Treasury Race
As of writing, StrategicETHReserve’s data reveals that around 71 public companies directly control 4.71 million of ETH’s supply worth $20.32 billion. These make up 3.9% of the token’s 120.7 million circulating supply.
Meanwhile, exchange-traded funds (ETFs) account for 6.71 million ETH worth 28.93 billion, representing 5.55% of the digital asset’s circulating supply.
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