As BlackRock advances its staking Ethereum fund, analysts believe that this product may directly compete with existing digital asset vaults, intensifying market concerns about the sustainability of corporate crypto vault companies.
According to a report released by crypto research firm 10x Research on Thursday, BitMine Immersion Technologies, the world's largest corporate Ethereum holder, currently has an unrealized loss of about $1,000 per purchased Ethereum, with total unrealized losses reaching as high as $3.7 billion.
The declining net asset value (NAV) of these companies makes it increasingly difficult to attract new retail investors, while many existing shareholders are effectively "trapped" unless they are willing to sell at a significant loss. Markus Thielen, founder of 10x Research, pointed out in a LinkedIn post:
"When the premium inevitably shrinks to zero, as it is now, investors find themselves trapped in a structure from which they cannot exit without incurring significant losses; this is the real 'Hotel California' scenario." He added that unlike exchange-traded funds (ETFs), digital asset vault companies (DATs) often have complex, opaque, and hedge fund-like fee structures that quietly erode returns.
The mNAV ratio is used to compare a company's enterprise value with the value of its held crypto assets. When mNAV is above 1, the company can accumulate digital assets by raising funds through issuing new shares; below 1 makes it more difficult to expand capital and holdings.
According to Bitminetracker data, BitMine's base mNAV is 0.77, and the diluted mNAV is 0.92.
Currently, BitMine holds approximately 3.56 million Ethereum, with a total value of about $10.7 billion, accounting for 2.94% of the total Ethereum supply. The company's average cost is $4,051 per Ethereum.
Other DAT companies have also seen significant declines in mNAV, including Strategy, Metaplanet, Sharplink Gaming, Upexi, and DeFi Development Corp.
According to Cointelegraph's report earlier on Thursday, BlackRock has registered a new staking Ethereum ETF product in Delaware, marking an important step for the $13.5 trillion asset management giant in diversifying its Ethereum-related products.
The proposed BlackRock Ethereum staking ETF is expected to become another low-cost, high-yield fund, without the hidden fees commonly associated with traditional vault companies. According to 10x Research, this development could threaten the economic model of DATs.
"As BlackRock seeks to stake Ethereum in its ETF and provide a low-cost source of returns, the economics of DATs are likely to face increasing scrutiny," the research report noted.
According to 10X, as more investors realize that a 0.25% management fee is far lower than the embedded costs within DATs, they may begin to shift their funds towards BlackRock's potential staking Ethereum fund.
REX-Osprey and Grayscale have launched their respective staking Ethereum ETF products in September and October.
Related: Analyst: Bitcoin (BTC) at $90,000 is a "great opportunity to buy with your eyes closed"
Original article: “BitMine trapped in $3.7 billion loss as DAT 'Hotel California' model faces BlackRock's staking Ethereum (ETH) ETF challenge”
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