Another day, another crypto treasury company hits the wire.

The newly formed ETHZilla, formerly known as the Nasdaq-listed biotech firm 180 Life Sciences, closed its $425 million investment across 60 different investors and its subsequent pivot to an Ethereum treasury company on Monday.

It’s an unusual beast. Compared to many of its counterparts, including the grandfather of turning public companies into crypto buying machines, Strategy, ETHZilla is leaving out one key element: leverage.

McAndrew Rudisill, ETHZilla’s incoming chair, isn’t taking that chance on his Ethereum bet.

“There will be a point in the cycle where maybe Ether runs to $15,000 and pulls back to $10,000. That’s still a 33% drawdown,” Rudisill told DL News. “We don’t want to be levered for that.”

Foregoing debt

Strategy’s chair, Michael Saylor, has raised billions selling convertible debt, the proceeds of which are then ploughed into buying more Bitcoin.

Convertible debt offers holders interest like a bond, but with the option to convert it into shares in a company.

It’s not risk-free, however.

If Strategy can’t refinance that debt at its maturity in the next three years because it doesn’t have enough cash or stock, it could face a liquidity crunch and be forced to sell from its Bitcoin stockpile.

And bring market prices crashing.

‘Peak treasury company’

With hundreds of companies turning to crypto to boost their balance sheet this year, questions swirl around how long the trend can last.

The vast majority of those holdings are in Bitcoin. There are approximately 220 companies that now hold some $424 billion, 17% of all the Bitcoin on the market, according to data from Bitcoin Treasuries.

Of late, Ethereum, the industry’s second-largest digital asset by market cap, has become a popular choice.

Ethereum co-founder Joe Lubin kicked off the trend in June after his blockchain company Consensys co-invested $425 million in the online gambling company SharpLink Gaming.

Wall Street strategist and crypto bull Tom Lee joined shortly after converting a little-known Bitcoin mining firm called BitMine Immersion into one of the largest Ethereum treasury companies on the market.

Campaigns to convert debt and equity into crypto are also trickling down to much smaller digital assets, such as the Ripple-founded XRP, crypto exchange Binance’s native BNB, and Telegram’s Toncoin.

‘The new companies in those ecosystems will have a harder time getting oxygen.’

—  Mike Novogratz, CEO of Galaxy Digital

And investors continue to lap it up.

When the Canadian vaping company, CEA Industries, announced it would invest $500 million into BNB on July 28, the company’s stock soared a whopping 548%.

The stock has fallen 70% since then, raising more questions about when investors will have seen enough.

“We’ve probably gone through peak treasury company issuance,” Mike Novogratz, the chief executive officer of Galaxy Digital, told shareholders during his company’s earnings call on Tuesday. “The new companies in those ecosystems will have a harder time getting oxygen.”

Going onchain

Still, ETHZilla’s Rudisill is confident his strategy will have plenty of breathing room.

Unlike Bitcoin, Ethereum can generate additional yield via staking, a process where Ether is deposited into the network to validate transactions and earn rewards.

‘There’s going to be rapid consolidation.’

—  McAndrew Rudisill, incoming chairman of ETHZilla.

On top of that, ETHZilla has tapped investment firm Electric Capital, which also invested in ETHZilla, to use the company’s Ether holdings to generate more yield via different onchain lending opportunities. Rudisill declined to say how exactly.

He estimates that the strategy will generate “high single-digit to low double-digit” yield on the company’s Ether.

Should the crypto treasury trend grind to a halt, Rudisill suggests that the firm’s lack of debt, diversified yield strategy, and strong team will separate ETHZilla from the pack.

It could even open up new opportunities.

Fire sale

A sharp drop in crypto prices might force distressed companies to issue even more stock to raise cash or sell off their crypto holdings.

Such an event would be a boon for firms with the deepest pockets.

“The big Ethereum treasury companies are going to get more Ethereum, and there’s going to be rapid consolidation,” Rudisill said.

“And that’s going to be positive for Ether prices.”