Key Takeaways
- Bitcoin still dominates DATs with $160B in holdings, but Ethereum’s yield-bearing PoS design and DeFi ecosystem make ETH treasuries a stronger long-term play.
- Ethereum offers native yield and composability, enabling staking, lending, and participation in tokenized real-world assets.
- Sustainability requires diversification, with ETH DATs needing stable, non-crypto assets to hedge volatility and ensure resilience.
Over the last six months, the emergence of digital asset treasuries, or DATs for short, has been reshaping how organizations think about liquidity, diversification, and long-term capital strategy.
Having started as a Bitcoin-investing trend, with Bitcoin treasuries amassing close to 1.4 million BTC (worth around $160 billion at the time of writing), DATs have expanded to Ethereum, Solana, and even more cryptocurrencies over recent weeks and months.
However, Bitcoin has remained by far the most popular treasury asset. While BTC treasuries hold over $160 billion, ETH treasuries have only amassed around $15 billion to date, while other crypto treasury holdings remain negligible in comparison.
MSTR Copycats?
This can be attributed in part to the success of Strategy, the original Bitcoin treasury, which many listed companies are looking to emulate.
Bitcoin is a bigger, more established cryptocurrency that is even being added to national reserves. It continues to be the King of digital assets.
Yet once you take a look at the fundamentals, companies building Ethereum treasuries at this point in the cycle could be considered far better positioned in the long term – with a few caveats.
An Unfair Comparison
Putting Bitcoin and Ethereum in the same basket is like comparing apples to oranges. Bitcoin was designed as an alternative payment system in the wake of the 2008 Financial Crisis.
Ethereum, meanwhile, is the first smart contract blockchain and the original home of decentralized finance. Ethereum’s tech stack boasts composability, with an established network of Layer 2 chains for scaling, and most importantly, it’s a productive asset.
Ethereum’s Proof-of-Stake (PoS) design gives it a major advantage over Bitcoin – an ability to produce native yield. Right now, the yield on ETH sits at around 2.8% without any complex yield-farming strategies, though it has been higher in the past.
This makes ETH more akin to an interest-bearing bond or an income-producing vehicle with a risk element attached. Whereas, with Bitcoin, it’s risk but no income.
Ironically, the missing income component is less important at a point in the cycle where markets are pumping. But in a messy market economic environment, yield becomes more important.
That’s not to say that there’s no way to earn yield on Bitcoin. If investors want it, builders will build it.
However, unlike Ethereum, Bitcoin doesn’t allow yield to be earned natively on the blockchain itself, which creates the opportunity to take advantage of Ethereum’s composability.
Building With LEGO
Ethereum’s decentralized apps (dApps) are essentially like LEGO building blocks for a DeFi ecosystem. This interoperability, the ability to plug and play, allows them to stack on top of each other to offer financial outcomes.
As such, an Ethereum treasury company can stake its ETH to earn native yield, borrow and lend against its ETH asset to earn additional income.
Focusing on an Ethereum treasury allows corporates to participate in decentralized finance, secure the network and function in a structure that fits security compliance requirements.
To date, Ethereum remains the leading blockchain for the growing digital asset market, hosting over $90 billion in DeFi total value locked (TVL) and more than 50% of total stablecoin supply.
It’s also the blockchain of choice for institutions experimenting with DeFi or tokenization.
The biggest tokenized RWA fund in the market – BlackRock’s $2.2 billion BUIDL fund – was built on Ethereum, while other leading players like Franklin Templeton and Fidelity Investments are also active in the Ethereum RWA space.
Even when it comes to capital appreciation, the upside potential for Ethereum is promising. Indeed, Bitcoin’s market cap now sits at around $2.3 trillion, while Ethereum is less than a quarter of that at around $540 billion.
Ethereum’s medium-term potential and use cases may position it as a solid choice for future asset growth.
Downside Protection
However, as the DAT trend gathers steam, the volatility of crypto assets has to be addressed. Otherwise, we’re witnessing the creation of a house of cards that will collapse at the first whiff of a major downturn, potentially even bringing down a portion of the financial ecosystem with it.
After the crypto collapse of 2022, everyone in the crypto ecosystem knows exactly what happens when a treasury is backed by highly volatile assets.
To hedge against crypto’s inherent volatility, Ethereum DATs must protect their portfolios with stable assets that can dampen this volatility once the market turns.
On the blockchain, these assets take the form of tokenized gold, T-bills, property, or other stable assets that are not heavily correlated with risk assets like tech stocks and cryptocurrencies.
More than half of the total value in these real-world assets is native to the Ethereum ecosystem, so ETH treasuries are perfectly positioned to take advantage of it.
This step is essential to building a truly sustainable treasury, rather than simply taking a speculative bet close to the top of a market cycle.
As the DAT fever continues, it’s time to look under the hood of companies making a big bet on the future of the digital asset market. Only those who have thought this strategy through will survive and flourish beyond the short-term hype.
The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Kevin Rusher is the founder of the real-world asset (RWA) lending and borrowing ecosystem RAAC. Backed by Chainlink and part of the Circle Alliance, RAAC is widening participation in tokenized RWAs like property and gold within decentralized finance. With a background in finance, accounting, and the crypto industry, Kevin brings a wealth of expertise to RAAC. Active in cryptocurrency since 2017 and working full-time in the space since 2020, Kevin combines extensive traditional finance knowledge with a passion for decentralized innovation.
