Ethereum treasuries are in trouble.

Market premiums for shares in companies that hold Ether as a reserve asset have evaporated from 5x during the summer to below 1x by September, marking what Coinbase analysts are calling the end of the “speculative phase” and the beginning of a brutal “player-versus-player” battle for survival.

Translation: investors no longer these as growth plays on crypto euphoria.

Instead, they’re just expensive wrappers for Ethereum itself.

The premium collapse comes as 71 firms collectively hold over four million Ether worth about $22 billion, and that figure continues to grow. BitMine and SharpLink Gaming, the two largest treasuries, comprise more than 50% of the market.

Yet investors value many of these companies below the value of their crypto holdings. Bitcoin treasuries are suffering the same scenario, where one in three of the 172 public firms holding Bitcoin are trading below their premiums.

Dilution without delay

Unlike Bitcoin treasuries, many of which use convertible debt with delayed or potentially no dilution, Ethereum treasuries just issue shares and hope for the best.

That’s the problem, analysts say.

“For the most part, they’re not employing any convertible debt strategies,” Luke Nolan, senior Ethereum research associate at CoinShares told DL News.

“They are doing straight up at-the-money equity offerings, immediately diluting shareholders.”

Dilution is something that investors in the Bitcoin space are also dealing with nowadays.

Michael Saylor’s firm, Strategy, recently went back on a promise to not dilute shareholders, irking the Bitcoin faithful.

The numbers are damning. Strategy dropped from a 1.8x premium in July to 1.29x today. Another Bitcoin treasury bulwark, Metaplanet, crashed from 7.14x premium in June to just 1.4x now.

“It’s quite a stark decline,” Nolan noted. “I think this is likely to continue for those.”

Things aren’t faring any better for Ethereum treasuries.

Seven of the 17 Ethereum treasuries tracking their premiums now trade below net asset value, also known as mNAV, with SharpLink Gaming, led by Ethereum co-founder Joe Lubin, sitting just below 1. ETHZilla is trading at a 20% discount, while BTCS Inc. offers investors a more than 30% discount.

The mNAV metric measures whether a treasury company’s stock price trades above or below the value of its crypto holdings. Above 1 means investors are paying a premium, below 1 means they’re getting a discount.

Indeed, the pack leaders are making questionable moves.

Bitmine, the largest Ethereum treasury, is “investing cash into alternative opportunities like OCTO — which detracts from being a pure play,” Nolan said.

Volume collapse

Their dwindling trading volumes are only making the outlook worse.

Digital asset treasury volumes peaked in mid-August, then plummeted 55% into September, according to Coinbase.

Max Shannon, senior research associate at Bitwise asset management, points to multiple factors killing demand: declining interest in exchange-traded funds, rotation back into Bitcoin, and the emergence of Solana and Avalanche treasuries stealing mindshare.

“Ethereum treasuries’ trading volumes, on aggregate, collapsed from their peak,” Shannon told DL News.

“For the last two weeks they’ve sat below the point from when Bitmine kicked off the Ethereum treasury craze, in turn crushing mNAV.”

Now, this could be a short-lived break as the market awaits a decision from the Federal Reserve regarding interest rates next week.

‘Winners take most’

Moreover, Shannon expects brutal consolidation ahead.

The distribution of Ethereum treasuries “skews heavily toward ‘sharks’ and ‘fish’” — mid-sized players holding anywhere from 101 to 100,000 Ether — with just a handful of whales commanding real scale.

“The reality is likely a ‘winners take most’ situation,” Shannon said. “We expect consolidation over time, with a small number of dominant players commanding most flows — much like what we’ve seen in Bitcoin treasuries.”

But at least Ethereum treasuries won’t blow up like their Bitcoin counterparts, according to Nolan.

“Because they have little to no outstanding interest payments, there is no risk of liquidation,” Nolan said.

Nolan also forecasted what needs to happen for momentum to pick back up for Ethereum treasuries: “Ethereum gathers steam again and gets closer to an all-time high.”