jakiro
author:Big and big orange; source: X, @0xVeryBigOrange
Recently, I have always had a thought that I think is a bit crazy, that is, the Ethereum bought by BMNR and SBET is equivalent to being destroyed?
First, let’s ask, mNAV negative premium vs. Does the company need to sell coins?
pictureSBET, BMNRTheir core patterns are usually:
● The company passedATMAdditional stock issuance, financing when the market premium is high;
● Use financing proceeds to buy underlying assets such as ETH or BTC;
● Keep these coins as assets on the company’s books and use them to correspond to market value and NAV.
The key points are:
● TheyHave no debt issued to buy ETH(Unlike leveraged Bitcoin mining machine companies that borrow money to buy mining machines/buy coins);
● So when NAVs have negative premiums, theyNo need to sell ETH to “correct”.
● NAV premium/discount is just a change in the relationship between market share prices and company holding ETH, and the company itself will not sell coins.
If you want to ask yourself, when will the company buy ETH?
The time when these coin stock companies will really buy ETH is usually:
● Stock price appears in the secondary marketHigh premium;
● The company chooses to passATM (at-the-market) additional issuanceShares;
● The money raised is used directly to buy more ETH.
In this way, their ETH reserves will increase.
Will they sell ETH?
In theory:
● They are not very willing to sell ETH for a “discount” (because they do not have this obligation);
● Their positions are all public addresses on the chain. Once the bottom positions are opened, it will cause market panic. Both ETH and the currency stocks themselves will quickly enter the death spiral;
● Unless the company itself has operating costs (wages, audit fees, listing costs, etc.), it is necessary to sell a small part of ETH regularly to cash flow;
● But there will not be a forced redemption mechanism like ETFs.
So overall,The probability of buying is much greater than selling.
Do I understand correctly?
● When these coin stock companies buy ETH, they essentially convert secondary market funds into real coins on-chain buying;
● From the perspective of the Ethereum ecosystem, it is indeed a bit similar to “semi-permanent lock-up”, because they will basically not sell after buying (except for a small amount of expenses);
● SoEquivalent to a slow ETH reduction circulation (similar to the destruction effect).
But there is still a difference from “real destruction”:
● True destruction is the complete disappearance of ETH from circulation;
● The ETH bought by the coin stock company is still on the chain, but is locked in the company’s vault and may still be sold in the future.
Coin stock companies are more like ETH’s “reservoirs” and will only buy ETH when the premium is high, and will hardly sell ETH because of discounts..
So their existence does in a sense increase the “absorbing plate” of ETH, bringing an effect similar to “circulation reduction/destruction”.
