Key takeaways
– Founders Fund fully exited ETHZilla after earlier disclosing a roughly 7.5% stake; SEC filings show its holdings dropped to zero by end-2025.
– ETHZilla pivoted from biotech to an aggressive Ether treasury model, raising hundreds of millions and at one point holding over 100,000 ETH.
– Debt-driven structures forced ETHZilla to sell 24,291 ETH in December 2025 to meet obligations, illustrating how leverage can compel asset sales at inopportune times.
– Ether treasuries add operational complexity relative to Bitcoin hold-only treasuries because staking and DeFi activities introduce smart-contract, liquidity and counterparty risks.
Overview
A Schedule 13G amendment filed with the SEC revealed that entities linked to Peter Thiel’s Founders Fund exited their stake in ETHZilla, a publicly traded company that repositioned itself as an Ether-focused treasury vehicle. The exit follows a steep decline in ETHZilla’s share price and a broader pullback in appetite for leveraged or equity-wrapped crypto exposure. This piece explains why Founders Fund and similar investors pulled back and what ETHZilla’s experience exposes about Ether treasury strategies.
ETHZilla’s transformation and strategy
In mid-2025, biotech firm 180 Life Sciences rebranded as ETHZilla after raising roughly $425 million to pursue an Ether treasury strategy. The company aimed to buy and hold Ether and to deploy it into staking and decentralized finance (DeFi) protocols, offering public shareholders a way to capture Ether upside through an equity wrapper. ETHZilla later sought an additional $350 million via convertible bonds to expand reserves and initiatives. At one point the company reportedly held north of 100,000 ETH.
The thesis was straightforward: raise capital through equity and convertible instruments, accumulate Ether, earn staking or DeFi yield, and give investors leveraged exposure to Ether’s appreciation. But that model depends on stable market conditions, access to refinancing, and conservative use of leverage.
The December 2025 sale and its implications
When crypto markets cooled, ETHZilla sold 24,291 ETH in December 2025, raising about $74.5 million to meet debt obligations. That reduced its holdings to roughly 69,800 ETH. For a firm built around an Ether treasury, having to liquidate holdings to cover liabilities revealed a key vulnerability: leverage can force sales at unfavorable prices, turning a long‑term accumulation strategy into defensive balance-sheet management.
Founders Fund’s subsequent reduction of its reported stake to zero came in the wake of that partial liquidation. Schedule 13G filings indicate the fund no longer met the disclosure threshold, but they don’t explain motive. The timing, however, suggests the exit aligned with broader concerns about leverage, liquidity and the operational risks of Ether-focused treasury models.
What a Schedule 13G exit means (and what it doesn’t)
A Schedule 13G amendment reporting zero shares simply shows the filer no longer holds enough stock to trigger disclosure. It does not disclose whether the sale was tactical, a reaction to governance or valuation concerns, or part of routine portfolio rebalancing. But when combined with ETHZilla’s forced sale and a weakening market for crypto treasury equity wrappers, the exit signals at least a reassessment of risk by a historically selective investor.
Why Ether treasuries are different from Bitcoin treasuries
Comparisons to Bitcoin treasury models are inevitable, but Ether strategies introduce added layers of complexity:
– Volatility and leverage: Ether’s price dynamics are often more reactive to ecosystem developments than Bitcoin’s, and leveraged balance sheets amplify downside. Convertible debt and other financing tools that look attractive in rallies can create liquidity stress in corrections.
– Yield-seeking operational risks: Ether treasuries commonly pursue staking rewards or DeFi returns. Those activities expose firms to smart-contract vulnerabilities, slashing risks for validators, locked liquidity windows and counterparty failures—risks largely absent from simple bitcoin hold-only models.
– Narrative and valuation uncertainty: Bitcoin benefits from a clearer “store of value” narrative. Ether’s role as the execution layer for smart contracts means its valuation is tied to network usage, upgrades, fee dynamics and cross-chain competition, which complicates market pricing for public equity wrappers.
Capital structure and feedback loops
Convertible debt and equity issuance can accelerate accumulation during bull markets by providing cheap leverage. But when prices fall:
– Net asset values decline, increasing discounts to NAV.
– Share prices drop, making new capital more expensive.
– Refinancing becomes harder, potentially triggering asset sales to meet liabilities.
This feedback loop turns capital structure into a source of vulnerability for firms that rely on debt or convertible instruments to build crypto positions.
Divergent approaches among Ether accumulators
Not all companies with Ether treasuries reacted the same way to market weakness. Some continued accumulating, betting on long-term network growth. Others liquidated significant positions, crystallizing large losses. The divergence highlights that the Ether treasury model is not inherently unsustainable; outcomes depend on leverage levels, risk controls, governance and resilience to volatility.
Opportunity cost and cleaner exposures
Institutional investors today can obtain Ether exposure through more direct and regulated means—secure custody, staking-enabled products, spot ETFs and derivatives—reducing the need to accept company-level operational and governance risk. An equity wrapper around a leveraged crypto treasury adds managerial discretion, refinancing risk and execution risk on top of asset performance. For a venture firm like Founders Fund, whose core competence is backing scalable operating companies, that additional layer may not align with strategy or risk appetite.
Takeaway
ETHZilla’s shift from biotech to an Ether treasury showcased an aggressive attempt to package cryptocurrency exposure into a public equity vehicle. The combination of market selloffs, leverage, and the operational complexities of staking and DeFi made that model fragile. Founders Fund’s exit—timed shortly after ETHZilla’s debt-driven ETH sale—underscores how capital structure and execution risk can outweigh the upside narrative for some investors. Ether treasury strategies can still work, but they demand conservative leverage, robust risk controls, transparent governance and an acknowledgement of the unique technical and liquidity risks Ether introduces compared with a simpler bitcoin treasury approach.