Pantera Capital has invested $300 million in companies with crypto treasuries, arguing their returns could surpass those of crypto ETFs. The firm stated that these companies, which generate yield to grow their digital asset holdings, offer a higher potential for returns for investors.
Pantera Capital has allocated $300 million to a burgeoning subset of organizations with substantial digital asset treasuries, contending that their performance may surpass that of crypto exchange-traded funds (ETFs).
According to Pantera general partner Cosmo Jiang and content head Erik Lowe in a note issued on Tuesday, digital asset treasuries (DATs) “can generate yield to grow net asset value per share, resulting in more underlying token ownership over time than just holding spot.”
They contended that the potential returns of owning shares in a DAT could be greater than those of holding tokens directly or through an ETF.
The company has backed DATs in the United States and the United Kingdom that contain Bitcoin, Ether, Solana, and other altcoins.
Jiang and Lowe stated that these companies leverage their distinctive position to “implement strategies to increase their digital asset holdings in a per-share accretive manner.”
Crypto treasury companies have become one of the most popular trends on Wall Street, attracting billions of dollars from investors and causing share prices to rise.
Nevertheless, industry representatives warn that the market may become overcrowded, which could leave certain actors susceptible to collapse.
BitMine Immersion Technologies, which Tom Lee chairs, was one of Pantera’s initial investments from its DAT Fund.
In two and a half months, BitMine has emerged as the third-largest crypto holder among public firms worldwide and the largest Ether treasury company.
It has established an objective of acquiring 5% of Ether’s total supply and currently holds nearly 1.2 million ETH, which is valued at approximately $5.3 billion.
BitMine’s approach involves issuing stock at a premium to net asset value, utilizing convertible bonds to monetize volatility, and generating stake and DeFi yields.
Pantera acknowledged that the organization’s capacity to maintain these strategies “will be tested over time.” However, its approach has already attracted prominent investors, including Stan Druckenmiller, Bill Miller, and ARK Invest.
BitMine’s shares (BMNR) have increased by more than 1,300% since the company announced its ETH acquisition plan in late June, in contrast to Ether’s nearly 90% increase during the same period.
Pantera stated, “We anticipate that institutional investors will begin to recognize the growth story of the highest quality DATs.”
Vitalik Buterin Issues Warning Regarding Potentially Negative Impacts of Overleveraging on Crypto Treasury Companies
Nevertheless, the optimism is not universally shared. Ethereum co-founder Vitalik Buterin has cautioned that overleveraging could result in the collapse of certain treasury companies in the event of a market downturn.
Vance Spencer, the co-founder of Framework Ventures, recently proposed that a significant portion of the ETH purchased by treasuries will be utilized in on-chain lending markets to cycle or farm yields, thereby increasing systemic risk.
In June, Standard Chartered analysts warned that Bitcoin-focused treasury firms could encounter difficulties if BTC prices plummet significantly. This underscores that the rise in DATs carries a substantial downside potential.
Matthew Sigel, VanEck’s Head of Digital Asset Research, has also expressed apprehension regarding the Bitcoin treasury strategies employed by specific public companies. He posits that the continued accumulation of BTC could eventually be detrimental to shareholders rather than beneficial.
