Since they emerged from stealth mode two months ago, a dozen Ethereum treasury companies have bought 2 million ETH between them, with Standard Chartered analysts estimating they’ll add another 10 million to that pile over time.
There’s growing excitement that billions worth of that ETH could flow into DeFi protocols as firms compete to chase yields greater than the 3%-5% on offer from staking and re-staking.
Etherealize’s Vivek Raman tells Magazine “healthy competition” between treasury companies for yield could light a fire under the DeFi sector before the end of the year.
“I’m actually pretty excited to see it. This could be the stimulus needed for DeFi Summer 2.0 — but on the institutional scale and bigger and better.”
GameSquare Holdings, BTCS, BitDigital, The Ether Machine and ETHZilla have all announced plans to juice ETH yields via DeFi, while Tom Lee’s BitMine Digital and Joe Lubin’s SharpLink Gaming are staking and restaking their ETH for now, while they refine their DeFi plans.
John Chard, vice president of operations for SharpLink, tells Magazine that he sees “selective DeFi participation as a natural next step beyond staking, leveraging Ethereum-native infrastructure not only to preserve value but also to grow it.”
“We also feel that, as more companies adopt ETH as a balance sheet asset, they will realize, sooner than later, DeFi isn’t just a curiosity — it’s a competitive edge,” he says.
GameSquare targets up to 14% return from ETH in DeFi
GameSquare Holdings is a successful digital media, entertainment and technology business that’s currently sixth on the ETH treasury leaderboard. It’s partnered with Ryan Zurrer’s Swiss crypto investment firm, Dialetic, to help grow its ETH treasury 5x its current size to $250 million.
Rhydon Lee, from GameSquare’s advisory board, tells Magazine that the 3% return from staking ETH can be considered the risk-free rate of return — akin to buying treasuries in traditional finance. But GameSquare is setting its sights much higher.
“We’re targeting 8%-14% yield generation on just our Ether alone — whether it’s other theses within Ethereum, such as digital NFTs, Web3 gaming, prediction markets, digital identity, stablecoins.”
Unlike parking money in an ETH ETF, investing in some of the more aggressive Ether treasury firms is more like hiring a DeFi portfolio manager to try and grow your holdings. The more successful they are at doing so, the more attractive their stock becomes to investors.
Dialectic uses an algorithmic trading system called Medici that monitors the activity of successful yield farmers to find the best risk adjusted returns across different liquidity pools and protocols. It can automatically enter and exit hundreds of positions at a time.
“There’s a whole team of devs that operates that for Dialectic that’s programmatically allocating to specific pools based on specific parameters or based on even things like watching smart money wallets and where they’re going into it.”
GameSquare even swapped equity for a CryptoPunk, which Lee believes can multiply returns, given blue chip NFT prices tend to go up in ETH, even as ETH goes up in USD terms.
“If we have 10 Ether, I hope we can have 11 Ether next year,” Lee says. “And based on the returns that Dialectics has had over the last four years, I think that’s achievable.”
ETH treasury companies are more than they seem
ETHZilla, which emerged on Ethereum’s 10th birthday with a $425-million raise, is pursuing a similar strategy. It partnered with DeFi asset manager Electric Capital on a “differentiated, onchain yield generation program” to generate between 3% and 10% annually.
BTCS, meanwhile, is the oldest listed crypto company in the US, having gone public in 2014. It shifted from Bitcoin mining to Ethereum infrastructure in 2017-2018 and now runs validators, analytics and block building.
BTCS CEO Charlie Allen told “The Milk Road Show” podcast that running its own solo ETH validator nodes or via Rocket Pool provides “about a 40% increase on the earnings” it could make using third-party staking. It’s also employing some arcane strategies in DeFi that may seem risky to some.
Allen revealed the company recently deposited $100 million in ETH to Aave for its flywheel strategy. It borrows USDT against the ETH collateral and uses it to buy more ETH, which is then staked via “solo or Rocket Pool nodes to kind of maximize yield.”
Bit Digital’s “alphamaneuvers”
Another former Bitcoin miner, Bit Digital operates a cloud infrastructure business for generative AI with $100 million in contracted revenue, as well as blockchain validator…
cointelegraph.com