Crypto venture capital firm Pantera Capital has invested $300 million into companies with crypto treasuries, predicting that their yields will be better than crypto exchange-traded funds (ETFs).
Pantera’s general partner, Cosmo Jiang, and content head Erik Lowe said on Tuesday that 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 added: “Therefore, owning a DAT could offer higher return potential compared to holding tokens directly or through an ETF.”
Pantera has deployed more than $300 million into crypto treasury firms based in the US, the UK and Israel that hold various tokens, including Bitcoin (BTC), Ether (ETH), Solana (SOL) and several other altcoins.
“These DATs are taking advantage of their unique situations to employ strategies to grow their digital asset holdings in a per-share accretive way,” Jiang and Lowe said.
So-called crypto treasury companies are the hottest trend on Wall Street, having collected billions of dollars from investors and seen their share prices soar. Still, some have warned that the market has become crowded and many could collapse.
Pantera pins BitMine as model example
Tom Lee-chaired Ethereum treasury company BitMine Immersion Technologies was the first investment out of the Pantera DAT Fund, as it “exemplifies a company with a clear strategic roadmap and the leadership to execute it.”
In two and a half months, BitMine has become the biggest Ether treasury company and has the third-largest holdings of crypto among public companies globally.
It holds almost 1.2 million ETH, worth about $5.3 billion, and aims to acquire 5% of the token’s total supply.
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The company’s model increases tokens per share through issuing stock at a premium to NAV (net asset value), using convertible bonds to monetize volatility, and generating staking rewards and decentralized finance yields.
Pantera said BitMine’s ability to sustainably execute on its strategy “will play out over time,” but it has already attracted backing from traditional finance institutional heavyweights, including Stan Druckenmiller, Bill Miller and ARK Invest.
Proof is in the stock price
Shares in Bitmine (BMNR) have gained more than 1,300% since the firm started its ETH buying strategy at the end of June. Over the same period, Ether has gained almost 90%.
“We expect that the growth story of the highest quality DATs will come to be appreciated by more institutional investors, just like what has happened with Strategy,” Pantera said.
Crypto treasuries not without risk
Not all agree that crypto treasury companies are destined to succeed.
Earlier this month, Ethereum co-founder Vitalik Buterin cautioned that overleveraging could lead to their downfall if not responsibly managed.
Framework Venture co-founder Vance Spencer said on Tuesday that most of the ETH scooped up by treasuries “will be placed into onchain borrow markets, drawing stables to loop or farm.”
Analysts at Standard Chartered warned in June that the new wave of Bitcoin treasury companies could be in danger of going underwater if Bitcoin’s price drops sharply.
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