# DeFi Yield Meets the Public Markets _How ETH treasury firms can turn brokerage shares into onchain cash flows_ August 1, 2025 • Michael Nadeau --- # DeFi Yield Meets the Public Markets ## How ETH treasury firms can turn brokerage shares into onchain cash flows Michael Nadeau August 01, 2025 Hello readers, The race is on. Over the next year or so, we expect the largest ETH treasury firm to significantly outperform ETH. How will we (try) to spot the winner? And what makes Wall Street pay a premium for a company that “just holds ETH?” This week, we’re covering the emerging ETH treasury company sector. Topics covered: - [Where does the premium come from?](#where-does-the-premium-come-from) - [KPIs to Track](#kp-is-to-track) - [Impact on DeFi](#impact-on-de-fi) - [Who will be the big winner?](#who-will-be-the-big-winner) - [Risks](#risks) ***Disclaimer:**** Views expressed are the author’s personal views and should not be relied upon as investment advice. * [](https://bit-digital.com/?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=defi-yield-meets-the-public-markets)The DeFi Report is powered by BIT Digital, the leading global platform for high-performance computing infrastructure and one of the largest ETH treasury companies. NASDAQ: BTBT Let’s go. # Where does the premium come from? Starting with BTC and Microstrategy as a segway into ETH, and why we believe *ETH is a superior asset for the “treasury strategy.”*  Microstrategy currently holds 628,791 BTC, valued at roughly $74.4 billion. The stock? It’s trading at an enterprise value of $126 billion. That means MSTR investors are paying 1.7x to buy MSTR shares compared to buying BTC directly. Returns from the bottom of the last bear market (1/1/23) through 8/1/25: - BTC: 596% - MSTR: 1,497% Where is this premium coming from? - Attention. Michael Saylor is *everywhere*. He has conviction. He loves the camera. And he’s the perfect ambassador — for both the company and for Bitcoin. Attention flat out matters. - Leverage. Saylor has done a masterful job of raising capital to buy BTC — via both convertible debt (often issued at 0% interest) and equity to increase BTC/share. The company currently has an 11% debt to Bitcoin NAV ratio, with most of this in ultra-low-cost convertible notes. - Volatility. Volatility increases the value of the embedded call option in convertible debt, making it more attractive to hold — especially for hedge funds and arbitrage traders. More volatility = more access to capital to buy more BTC for Michael Sayler. More BTC purchases (without equity dilution) = more BTC/share. *This feeds the premium. * - Access to “levered BTC.” Investors view MSTR as a “reflexive, levered bet on BTC.” They can get this exposure through their brokerage account, without applying any leverage themselves (Saylor does it for them). No crypto wallet. No seed phrases. No crypto exchanges. No complexity. Add it all up, and you get a “treasury company” that has historically traded at a premium to its BTC holdings. In fact, the premium got as high as 3.89 on 11/20/24. We know. It probably *still* doesn’t make sense on the surface. And the premium will likely fall to a discount again (as it did in ‘22). But the crypto markets are *incredibly reflexive*. That’s the key takeaway. The flywheel for reflexivity on the upside for MSTR: Upside volatility for BTC ——> opens up the capital markets for Saylor ——> issue 0% convertible debt to raise capital ——> buy BTC ——> go on CNBC and talk about it ——> MSTR trades at a premium ——> raise more capital (announce intentions to buy BTC) ——> market front runs you (BTC rising) ——> more media coverage ——> more access to capital, etc. etc. *Reflexivity. * Now that we understand the mechanics for BTC, let’s move on to how this will work for the *more interesting* ETH treasury companies. ##### ETH Treasury Companies We think ETH is a superior asset to BTC when it comes to the “treasury company” strategy. Two reasons why: - Yield. ETH produces yield via staking. Furthermore, ETH Treasury companies can “re-stake” for more yield. And they can even go into DeFi, using ETH as collateral for loans and “looping.” We are not advocating the more risky strategies. But they are available for these companies to juice their yields and ETH/share — especially if shareholders are asking for it. This creates space for significant differentiation in terms of firm-specific strategies. We think the teams that execute well could earn premiums higher than what MSTR has seen (peak of 3.89). - Volatility. Over the last 12 months, ETH has had an annualized vol of 59%. This is 40% higher than BTC (42%). We think it will be even higher over the next year or so. Higher volatility could attract the convertible debt market due to the nature of ETH Treasury shares serving as an “embedded call option” for the holder of the convertible debt. More volatility *increases the value of the call option* — especially for hedge funds and arbitrageurs. This creates more demand for convertible debt, which will make it easier for some of these companies to raise capital and buy ETH. It will be interesting to see this play out because the dynamics here could pull capital in the convertible debt market away from MSTR, making it more competitive for Saylor to run his strategy. Just as investors view MSTR as a “reflexive beta play on BTC” straight from your brokerage account, the same will apply to ETH Treasury companies. The key difference? ETH treasury firms are offering “DeFi Yield in the Public Markets.” Let that sink in for a minute. # KPIs to Track We think these businesses will trade on completely different KPIs than traditional public equities. For example, p/e is probably not the correct metric for relative comparison. Instead, the metrics should focus on ETH holdings, the ability to generate yield, and increase ETH/share. Additional factors include ancillary businesses, team, ability to execute, access to the capital markets, attention, etc. As far as quantitative KPIs, these are the metrics we think make sense at this stage: - mNAV: measures the market cap vs the value of the ETH holdings (the premium or discount). - ETH/share: measures how well the firm is at growing ETH/share for the company’s shareholders. - Share dilution: measures the firm’s ability to tap the convertible debt markets vs diluting shareholders with equity issuance. - Debt/ETH NAV: measures the amount of debt vs the value of the company’s ETH holdings. - DeFi Yield (staking, re-staking, DeFi): measures the firm’s ability to execute DeFi strategies to grow ETH/share. # Impact on DeFi We are keeping an eye on the amount of ETH that treasury companies purchase + how much of that is flowing into staking and DeFi. Why? We think the ETH treasury firms could spark a “DeFi Summer 2.0.” You can think of this as “reflexivity feeding reflexivity.” How we think it could play out: Upside volatility for ETH ——> opens up the capital markets for ETH treasury firms ——> issue 0% convertible debt to raise capital ——> buy ETH ——> go on CNBC and talk about it (e.g., Tom Lee) ——> shares trade at a premium ——> stake the ETH ——> Re-stake the ETH or add yield in DeFi ——> sparks onchain activity on the Ethereum Network ——> onchain activity sparks more onchain fees and higher DeFi yield, increasing the ETH yield and ETH/share ——> shares trade at a higher premium. *Reflexivity.* The biggest beneficiaries, as we see it: - Staking protocols. We expect to see ETH staked rise significantly. - Re-staking. Re-staking protocols such as EigenLayer should also see inflows. - Lend/Borrow Protocols: We think Aave could see an inflow of capital, with ETH treasury firms using their ETH as collateral within DeFi. - ETH holders. The firms buying ETH could push the price up + spark a flurry of onchain activity, increasing staking rewards and Ethereum’s fundamentals in the process. “DeFi Yield for Public Markets” That’s ultimately what these ETH treasury companies are offering shareholders. Access to ETH. Staking. Re-staking. Stablecoin activity. And DeFi strategies. All from your brokerage account. # Who will be the big winner? There are currently 14 ETH treasury companies. We think one of them will be a runaway winner, similar to MSTR for BTC. Here’s what we’re looking for to identify the winner: - Attention. We think the winner will have a recognizable public figure consistently appearing on CNBC to discuss both the company and Ethereum. - Speed. It’s a race right now. The firm that is the fastest out of the gate to build out a network of investment bankers and create the infrastructure to tap the capital markets will likely gain an early lead. This could grow on itself and produce more market share and investor interest over time. - Connections and trust. The firm that has the best network on Wall Street will be able to access capital faster, kicking off the flywheel necessary to raise cash, buy ETH, execute yield strategies, and attract *attention.*  - Execution. The winning team will be able to (safely) execute DeFi strategies that increase ETH/share. Remember. Reflexivity is the name of the game here. The firm that gets the early lead could kick off a reflexive feedback loop that allows them to grow fast + demand the largest premium. Below are some stats for the top 5 players today: Data: Strategic ETH Reserve, Yahoo Finance ##### Takeaways: - BitMine (BMNR) has the most ETH holdings and the second largest premium today. They are “sprinting” the fastest right now. BMNR also just announced a [$1b stock buyback plan](https://x.com/TheBlock__/status/1950170487515951330?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=defi-yield-meets-the-public-markets) and has Tom Lee as its Chairman and chief evangelist. The firm was previously focused on Bitcoin Mining and pioneered the concept of “immersion cooling” for miners — boosting hashrate by 25-30% due to more efficiency. - Sharplink (SBET) has the second most ETH and is trading barely at a premium to its holdings today. The stock is down 47% over the last few weeks. Sharplink is headed by Joe Lubin (Ethereum co-founder and founder of ConsenSys). Given the deep Ethereum expertise running the firm, Sharplink could be the first to deploy more interesting staking and yield strategies within DeFi. - The ETHER Machine (DYNX) is a newer entrant to the market and has the third most ETH holdings today. The stock is trading at a significant discount to its holding (86%). We believe the discount is largely due to fully diluted share data being outdated (due to the newness of this firm), post capital raise. This highlights the challenge for investors in selecting these firms for investment. *DYNX will likely dilute shares aggressively*, which will change the market cap and hence the discount. For this reason, we think it *looks* more attractive than it actually is right now. Andrew Keys is the founder and Chairman (formerly head of Global BD at ConsenSys). - BIT Digital (BTBT) has the fourth most ETH holdings and is trading at the highest premium thus far (2.07x its ETH holdings). BIT Digital is unique among the group because it’s built on a real business, rather than a “shell company” designed specifically for the ETH strategy. For example, BIT Digital has a profitable data center business (AI infrastructure) as well as a profitable Bitcoin mining business (that they’ve now converted to the ETH strategy). This could explain why it’s trading at the highest premium today. - BTCS has the fifth largest ETH holdings, and it is trading at a slight discount to those holdings today (.80). BTCS is a firm that initially focused on Bitcoin Mining and was the first crypto firm to pay dividends in BTC. They’ve recently pivoted hard into the ETH treasury strategy. # Risks - ETH Price. ETH needs to perform, or these companies will struggle. There is zero ambiguity here. - Loss of Premium. There is a doom loop to consider here. For example, let’s say activist investors short the stock to drive it down to a discount. The company then sells coins to get back to NAV and close the discount. Now the coins are going down in price. Market cap is dropping. Liquidity is dropping. Reflexivity on the way up. *Reflexivity on the way down. * - DeFi Risks. Smart contract risk. Custody management. Hacks. Liquidation. DeFi works. But it also has risks that are not present in traditional markets. *Team execution is critical. * - Leverage & market risk. Every crypto bubble is fueled by excessive leverage. The same thing that fuels the bubble is also the thing that pops it. In the last cycle, it started with the GBTC “carry trade.” In this cycle, it might just be these ETH treasury companies. # Closing Thoughts It’s important to understand the incentives of the various market participants to project how things *could* play out. If we assume that ETH performs well, we can start to project what will happen in the capital markets to fuel these ETH treasury companies. For example, Wall Street investment bankers and financial service providers will *love these companies. * Why? New product. New customer. New line of revenue. New ways to introduce even more products. For example, there are multiple MSTR ETF products, and there are 2x levered MSTR ETFs. This might not be a great thing for society. But the incentives of the players in the game point to it playing out this way. Let’s not forget that new legislation is reducing expenditure at the Consumer Protection Bureau, and the new SEC Chairman just announced *Project Crypto*, an initiative to “modernize the securities rules and regulations to enable America’s financial markets to move onchain.” *The entire economy is moving onto public blockchains. * If you’d like to know how we’re playing it in our portfolio, you can upgrade to TDR Pro and receive weekly updates on what we’re buying and selling [here](https://thedefireport.io/upgrade?utm_source=thedefireport.beehiiv.com&utm_medium=referral&utm_campaign=defi-yield-meets-the-public-markets). Take a Report. And Stay Curious. ***Disclaimer****: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. 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