Cryptocurrency treasury companies have begun purchasing over $7.8 billion worth of cryptocurrencies this week, potentially marking one of the largest corporate cryptocurrency acquisition actions in recent history—especially targeting altcoins.
Cointelegraph analyzed statements from 16 companies since Monday, which either announced purchase plans or raised funds for purchasing cryptocurrencies. Ethereum (ETH) is the hottest target.
At least five publicly traded companies have purchased or committed to buying over $3 billion worth of ETH, which is approximately 45 times the issuance of ETH in the past week.
The so-called cryptocurrency treasury companies are the latest trend on Wall Street, as traditional financiers are often restricted from directly purchasing cryptocurrencies or related exchange-traded products, thus seeking to engage with the rapidly growing cryptocurrency sector in this manner.
Bitcoin miner BTCS Inc. submitted a plan on Tuesday to sell up to $2 billion in stock to fund future purchases of Ethereum.
Joe Lubin's Sharplink Gaming has become the second-largest Ethereum treasury company, purchasing $338 million worth of ETH through two separate purchases on Monday and Thursday, further increasing the total.
The Ether Machine also purchased the asset this week, acquiring 15,000 ETH for approximately $57 million.
Meanwhile, two new Ethereum purchasing companies were born this week: biotechnology company 180 Life Sciences Corp rebranded to ETHZilla Corporation in a $425 million deal, and commercial bank Fundamental Global rebranded to FG Nexus in a $200 million deal.
Cryptocurrency treasury companies were also attracted to altcoins this week.
The largest altcoin purchase announcement came from Tron Inc., a penny stock toy company acquired by Sun Yuchen's Tron blockchain, which stated on Monday that it hopes to raise $1 billion to purchase the blockchain's token TRX.
Three other companies announced plans to purchase Solana (SOL), Sui (SUI), or Binance Coin (BNB)—BNB is closely related to the cryptocurrency exchange Binance.
The most notable treasury company established this week is CEA Industries, a Canadian e-cigarette company that transitioned to a BNB purchasing company after being acquired by investment firms 10X Capital and YZi Labs. YZi Labs has been described as the family office of Binance co-founder Zhao Changpeng.
The company plans to raise at least $500 million and potentially unlock up to $1.25 billion for purchasing BNB, which is reportedly primarily held by Zhao Changpeng and Binance.
On Thursday, tech company Cemtrex Inc. announced it purchased $1 million worth of SOL, aiming to expand to $10 million, while on Monday, lending institution Mill City Ventures III completed a $450 million deal, shifting to purchasing Sui.
Galaxy Research analyst Will Owens wrote in a report on Wednesday that cryptocurrency treasury companies collectively hold over $100 billion in cryptocurrencies, with $93 billion in Bitcoin.
Owens noted that this business model is not without risks, and not all companies receive equal valuations, as investors apply "widely varying" equity premiums to the companies' net asset values.
For example, Michael Saylor's Strategy has an equity premium of 58%, which Owens says reflects its "scale and maturity," while Japan's Metaplanet has a trading premium of 179%, attributed to its "aggressive capital formation model."
He added that this business model "heavily relies on a sustained equity premium on net asset value. If the premium collapses, or worse, turns into a discount, the model will begin to unravel."
"Treasury company trading is becoming increasingly crowded," Owens said. "When hundreds of companies adopt the same one-way trade (raising equity, purchasing cryptocurrencies, repeating), it can become structurally fragile. A decline in any of these three variables (investor sentiment, cryptocurrency prices, and capital market liquidity) could begin to unravel the other variables."
Bitcoin remains a popular choice for cryptocurrency treasury companies like Strategy, with seven companies proposing or purchasing a total of $2.7 billion in Bitcoin.
Strategy (formerly MicroStrategy) purchased 21,021 Bitcoins after raising $2.5 billion through its fourth preferred stock, STRC.
The Smarter Web Company in the UK also spent approximately $26.5 million to purchase 225 Bitcoins, while Metaplanet purchased 780 Bitcoins, valued at about $92 million.
On Tuesday, a new Bitcoin treasury company was established through energy company ZOOZ Power Ltd., planning an $180 million deal to purchase Bitcoin.
Related: Strategy's profits hit record highs, CEO declares: This is the most misunderstood stock in the market.
Original article: “$8 Billion Buying Spree: Cryptocurrency Treasury Companies Experience a ‘Crazy Week’”
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