Why Peter Thiel’s Founders Fund backed out of a bet on Ether Treasury

Key takeaways

• Founders Fund has exited ETHZilla entirely after previously holding a 7.5% stake. SEC filings show that entities linked to Peter Thiel had reduced their stake to zero by the end of 2025, signaling a decisive retreat from an Ether-focused public treasury strategy.

• ETHZilla’s move from biotech to an Ether treasury strategy has been aggressive. After raising $425 million and then seeking $350 million via convertible bonds, the company accumulated over 100,000 ETH, positioning itself as a leveraged stock proxy for Ether exposure.

• Debt-driven models can force cryptocurrency sales at unfavorable times. ETHZilla’s sale of 24,291 ETH in December 2025 to satisfy its debt obligations exposed a structural weakness. Leverage combined with the volatility of cryptocurrencies can trigger asset liquidation during economic downturns.

• Ether cash strategies carry more operational complexity than Bitcoin cash strategies. Ether-focused models often seek returns from staking and DeFi, introducing smart contract, liquidity, and counterparty risks that “hold-only” Bitcoin treasury models typically avoid.

Peter Thiel, the famous contrarian billionaire investor and co-founder of PayPal and Palantir, has a long history of bold and unconventional bets. A U.S. Securities and Exchange Commission (SEC) filing revealed that Founders Fund entities linked to Thiel exited ETHZilla after disclosing a 7.5% stake in 2025. ETHZilla is a digital asset treasury company focused on Ether.

The sell-off highlights broader market pressures on Ether cash patterns, as ETHZilla stock has fallen sharply from its summer 2025 highs amid falling Ether (ETH) prices. This comes at a time when investor enthusiasm for leveraged or equity crypto exposure appears to be waning.

This article examines why Thiel’s Founders Fund left ETHZilla and analyzes the risks of leveraged Ether treasury models, debt-focused balance sheets, and forced asset sales. It explores what this decision signals about volatility, capital discipline, and the sustainability of public crypto treasury strategies.

ETHZilla: From biotechnology to Ether treasure

In July 2025, biotech company 180 Life Sciences made a bold move, raising $425 million to launch an Ether-focused treasury strategy renamed ETHZilla. It has positioned itself as a publicly traded vehicle for exposure to Ether, with plans to bolster its Ether holdings and deploy them into decentralized finance (DeFi) protocols and tokenized asset initiatives.

Just two months later, ETHZilla sought to secure an additional $350 million via convertible bonds to increase its reserves and support other projects. Reports indicate that the company held over 100,000 ETH on its balance sheet at one point.

The idea behind this initiative was simple: secure funding, buy and hold Ether, generate potential returns through staking or DeFi activities, and provide public shareholders with leveraged exposure to Ether’s growth.

However, the strategy faced considerable challenges as market conditions deteriorated.

Did you know? In September 2022, Ethereum went from proof of work (PoW) has proof of stake (PoS) during an event known as “the merger“, reducing its energy consumption by over 99%. This is one of the most ambitious upgrades ever attempted on a live blockchain.

Milestone sale of ETHZilla and exit of Peter Thiel

As crypto markets retreated from their prior highs, ETHZilla began reducing its position in Ether.

In December 2025, ETHZilla sold 24,291 ETH, generating approximately $74.5 million at an average price of approximately $3,068 per coin. The stated purpose of the sale was to meet debt repayments. Following the transaction, his Ether holdings reportedly fell to around 69,800 ETH.

The sale of ETH marked a watershed moment for the company.

For a company built around Ether treasury, being forced to dump ETH to cover debt exposed a fundamental vulnerability. The combination of leverage and volatility of cryptocurrencies can trigger the sale of securities at any time. A strategy initially designed for patient, long-term accumulation can quickly turn into a rush to stabilize the balance sheet.

Shortly thereafter, Thiel Founders Fund reduced its stake in ETHZilla to zero, exiting its position entirely by the end of 2025, according to SEC filings.

What a 13G program output signals and what it doesn’t mean

A Schedule 13G filing signals a passive investment. An amendment declaring zero shares simply means that the filer no longer holds enough to meet the disclosure threshold.

However, these documents do not reveal the reasons for this change. They make it unclear whether the selloff stems from routine portfolio adjustments, de-risking, valuation concerns, or broader doubts about the Ether treasury approach itself.

Timing also matters in this case. The full exit of Founders Fund came shortly after the partial liquidation of ETHZilla amid growing pressure on similar Ether-centric balance sheet strategies.

Did you know? Before becoming synonymous with contrarian macro bets, Peter Thiel invested $500,000 in Facebook in 2004 for a 10.2% stake, a deal that later became one of Silicon Valley’s biggest venture capital returns.

Bitcoin vs. Ether Treasures: Store of Value vs. Layers of Hidden Complexity

While comparisons to Bitcoin (BTC) cash strategies are inevitable, Ether introduces levels of complexity that Bitcoin treasuries typically avoid.

Increased volatility amplified by leverage

Ether tends to experience greater price volatility due to underlying sentiment compared to Bitcoin. This behavior stems from Ether’s role as both a digital asset and fuel for a programmable blockchain platform. When treasury companies rely on convertible debt securities or other forms of leverage, withdrawals can trigger forced sales.

The search for yield introduces new risks

Bitcoin cash companies generally follow a simple hold and appreciate model. In contrast, Ether-focused companies often emphasize staking rewards or DeFi yields to improve returns. However, this approach comes with tradeoffs:

What promises higher returns can also increase operational complexity and systemic vulnerabilities.

Bigger challenges in storytelling and perception

Bitcoin treasury players benefit from a “digital gold” narrative rooted in the scarcity and allure of the store of value. Ether, however, represents a dynamic and evolving ecosystem shaped by network upgrades, gas fee dynamics, evolving regulatory viewpoints, and competition from other blockchains. This additional complexity increases uncertainty and makes it more difficult for markets to evaluate strategy.

Ether accumulators follow diverse paths

Not all companies that switched to Ether Treasuries reacted in the same way to the downturn in crypto markets.

Some of these companies continued to accumulate ETH, believing that network expansion and Ether’s long-term utility would offset short-term price turbulence. Others took the opposite route, liquidating all or a significant portion of their assets and realizing substantial losses.

This divergence in approaches suggests that the Ether treasury model is not inherently flawed or doomed to failure across the board. Its sustainability depends on factors such as leverage levels, risk control and resilience to market cycles.

Did you know? Unlike Bitcoin’s simple transaction fee model, Ether uses “gas” to measure computational work. During the peak boom of non-fungible tokens (NFTs), users sometimes paid hundreds of dollars in gas fees just to create digital collectibles.

Capital structure risks in volatile asset classes

Convertible debt structures can magnify potential gains in bull markets by providing relatively inexpensive leverage to acquire additional assets such as Bitcoin, thereby increasing returns as prices rise.

When companies trade at premiums to their net asset value (NAV), they can issue shares or convertible instruments to raise capital, which strengthens their holdings and can further enhance their upside potential.

However, during economic downturns, when stock discounts widen and cryptocurrency prices fall, the feedback loop can reverse:

In this type of bearish environment, even long-term investors with large Ether holdings may decide to reduce or exit their positions to limit downside risk.

Opportunity cost and cleaner exposure

Today’s institutional investors have much more direct ways to gain exposure to Ether than in previous market cycles. Options include secure direct custody solutions, regulated spot exchange-traded funds (ETFs), staking-enabled products and sophisticated derivatives. These structures can reduce exposure to company-specific operational, execution or governance risks.

In contrast, investing via a stock wrapper around a leveraged crypto cash strategy adds an additional layer of complexity and uncertainty. This includes exposure to management’s discretionary decisions, financing and refinancing strategies, governance structures and capital allocation priorities, which may deviate from pure asset performance.

Founders Fund is a venture capital firm historically focused on supporting high-growth, operating companies with scalable, technology-driven business models. A vehicle focused on a leveraged crypto balance sheet may not align perfectly with one’s long-term portfolio strategy or risk preferences. Recent developments, including its complete exit from Ether cash plays such as ETHZilla amid market pressures, highlight this selective approach to crypto exposure.