Ethereum (ETH), the second largest cryptocurrency by marketcap, has just flipped Bitcoin in one important metric: Corporations now hold a higher percentage of ETH’s supply than their Bitcoin counterparts do of Bitcoin’s supply. Corporations now hold 4% of ETH’s total supply, while corporations hold 3.6% of Bitcoin’s supply. Why does this matter?
For one, most corporations incorporating ETH or BTC into their treasury strategies are not traders or speculators: they aim to buy and hold. Moreover, there is more incentive for corporations to hold ETH longer term due to staking revenue – ETH is a yield bearing asset unlike Bitcoin (other than borrowing against it to invest in other assets or revenue streams).
Second, the more supply of a token that is locked by long term holders creates less circulating supply, theoretically pushing up its value to meet demand as scarcity rises. It is supply and demand 101.
Third, the higher the supply of a token that is locked by corporations or institutional investors fosters greater retail confidence.
Enter Japan
A recent trend has seen the rise of Japanese companies acquiring ETH. Quantum Solutions, an AI-focused company headquartered in Tokyo and backed by Cathie Wood’s ARK Invest, has just acquired 2,000 ETH through its subsidiary GPT Pals Studio Limited, boosting its holdings to 3,865.8 ETH worth some $15 million. The second largest Japanese ETH treasury firm Def Consulting also just announced acquiring 50 million yen of ETH. While modest amounts compared to their US counterparts, Japan’s trend will likely be replicated elsewhere in Asia. Already Hong Kong boasts a number of ETH treasury companies, including Jack Ma backed Yunfeng Financial Group. The founder of the cryptocurrency exchange Huobi and chairman of the Hong Kong investment company Avenir Capital has also recently raised US$1 billion to invest in ETH – the largest ETH raise in Asia.
Why are corporations betting big on ETH?
A key factor is ETH’s quiet but strong rise in becoming “the final form of digital trust for institutions to store trillions of dollars”.
As articulated in a recent article by TradingView:
“The financial world is witnessing an unprecedented shift, as Ethereum solidifies its position as the sole asset capable of becoming a multi-trillion-dollar institutional store of value. ETH is the only one currently demonstrating the scale, utility, and institutional acceptance to command and securely hold multi-trillion-dollar allocations, fundamentally redefining the future of global wealth preservation and growth.”
In short, ETH treasury corporations are betting big that the next leap in digital finance will not happen in a bank, but on Ethereum. And this leap is ocurring as traditional financial markets move onto the blockchain, a development that many analysts are calling one of the most consequential shifts in corporate finance.