Vitalik Buterin supports Ethereum treasury growth for wider access but warns that overleveraging could threaten Ethereum’s long-term financial stability.
Ethereum co-founder Vitalik Buterin has expressed support for the growing number of companies holding Ethereum (ETH) in their treasuries. In a recent interview on the Bankless podcast, Buterin commented that this tendency allows Ethereum to be closer to institutional and retail investors. However, he cautioned that these practices can be very hazardous in case they get too risky or too leveraged.
Buterin Backs Ethereum Treasury Services for Broader Access
First of all, ETH treasury firms represent companies that possess substantial volumes of Ethereum as their financial policy. These investments will provide access to Ethereum without directly putting their money in crypto. Buterin said that these are good options, particularly for those who are either not comfortable with the management of digital wallets or cannot access and purchase, and store ETH themselves. Buterin said that there are certainly valuable services that are offered, and they allow people with varying financial capabilities to access Ethereum.
Currently, the ETH treasury industry has expanded to a great extent. It currently has almost $11.77 billion worth of ETH. The market leader is BitMine Immersion Technologies, which holds more than 833,000 ETH, which is worth about 3.2 billion dollars. The other significant players are SharpLink Gaming, which holds $2 billion worth of ETH, and The Ether Machine, with 1.34 billion. These corporations are pursuing a trend that was initially witnessed in Bitcoin, where publicly listed companies such as MicroStrategy emerged to be significant holders of BTC.
According to CoinMarketCap, the price of ETH at the time of writing is $3,950. The appreciation of such holdings has increased with the increase in the popularity of Ethereum. Investment strategies such as the use of crypto assets on the balance sheet of more firms are taking place as long-term investments.
However, Buterin cautioned against treating this trend as an easy path to wealth. He said that ETH treasuries could seem a brilliant investment in bull markets. However, such a tactic may turn against the investor in bear markets. Prices of crypto have a history of volatility. The example of Bitcoin is more than 60 percent of its previous declines, and Ethereum has lost more than 80 percent.
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ETH Treasuries Risk Becoming ‘Overleveraged Game’: Buterin
This volatility is further compounded by the fact that the companies that hold crypto assets use too much leverage to finance them. “If you woke me up three years from now and told me that treasuries led to the downfall of ETH, I would guess that they turned into an overleveraged game,” Buterin warned.
Further, his remarks indicate a bigger issue within the crypto space. Traditional financial tools and institutions are entering the crypto space. This brings both benefits and risks. Wider adoption of cryptocurrencies can make them more legitimate. However, it can also expose them to the same financial problems seen in traditional markets.
Finally, Buterin has one message: ETH treasuries are a promising tool, but they have to be taken with caution. With increasing companies putting Ethereum on their balance sheets, the emphasis should be on good financial practices. He recommends that the Ethereum community ought to welcome growth, but not at the expense of stability.
