Concerns are growing about the sustainability of corporate cryptocurrency companies as BlackRock moves forward with an invested Ether fund that analysts say could directly compete with existing digital asset vaults.
Immersion Technologies, the world’s largest corporate holder of Ether (ETH), is currently losing $1,000 per ETH purchased, representing a cumulative unrealized loss of $3.7 billion on all holdings, according to Thursday’s BitMine study. report from Crypto Insights 10x Research.
The decline in net asset value (NAV) of these companies makes it tough to attract up-to-date retail investors, while leaving many existing shareholders “trapped” unless they sell at a significant loss, 10x Research founder Markus Thielen he wrote in a LinkedIn post.
“When premiums inevitably fall to zero, as they do now, investors will be trapped in this structure and will be unable to get out without significant damage, which is the true Hotel California scenario,” he said. He added that unlike ETFs, digital asset treasury companies, or DATs, “are subject to complex, opaque and often hedge fund-like fee structures that can quietly undermine returns.”
Related: BlackRock leads near $3 billion November Bitcoin ETF exodus with record outflows of $523 million
The mNAV ratio compares a company’s enterprise value with the value of its crypto assets. An mNAV above 1 allows a company to raise funds by issuing up-to-date shares to accumulate digital assets. Values below 1 make it much more tough to boost capital and shares.
According to data from BitMine, the basic mNAV was 0.77 and the diluted mNAV was 0.92. Bitminetracker.
BitMine holds approximately 3.56 million ETH worth approximately $10.7 billion, representing 2.94% of the total ether supply. The company’s average base cost is $4,051 per ETH.
Other DATs also saw their mNAVs drop sharply, including Strategy, Bitmine, Metaplanet, Sharplink Gaming, Upexi, and DeFi Development Corp.
Related: A Strategy Will Survive the Bitcoin Crash and Is Still on Track to Rank in the S&P 500: Matrixport
BlackRock is entering competition with cheaper competition
BlackRock has registered a up-to-date Ether ETF offering in Delaware, marking the first step toward diversifying the $13.5 trillion asset management giant into Ethereum-based products, Cointelegraph reported earlier on Thursday.
BlackRock’s proposed Ether ETF could be another low-cost income-generating fund without the hidden costs associated with established treasury firms. According to 10x Research, this development could threaten the DAT economy.
“As BlackRock now seeks approval to place ETH in its ETF, which offers a low-cost source of yield, the economics of DAT will likely come under increasing scrutiny,” the research report states.
According to 10X, more investors may start moving towards a potential Ether fund with BlackRock once they realize that the 0.25% management fee is significantly lower compared to DAT’s built-in costs.
Asset managers REX-Osprey and Grayscale have already introduced ETF products with an ETH station in September and October.
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