Why Peter Thiel’s Founders Fund Moved Away from Bet Ether Treasury

Basic considerations

• Founders Fund has completely exited ETHZilla after holding a 7.5% stake. The SEC filings show that entities related to Peter Thiel have reduced their ownership to zero by the end of 2025, indicating a decisive retreat from the Ether-focused public treasury strategy.

• ETHZilla’s exit from the biotech was aggressive to Ether’s treasury strategy. After raising $425 million and later seeking $350 million through convertible bonds, the company has amassed more than 100,000 ETH, positioning itself as a leveraged capital proxy for Ether exposure.

• Debt-based models can force crypto sales at unfavorable times. ETHZilla’s sale of 24,291 ETH in December 2025 to meet debt obligations indicated structural weakness. Leverage mixed with crypto volatility can lead to liquidation of assets during downturns.

• Ethereum treasury strategies have more complexity than Bitcoin treasury. Ether-centric models often follow the traceability and productivity of DeFi, introducing smart contract, liquidity, and counterparty risks that Bitcoin’s typically “hold-only” treasury models avoid.

Peter Thiel, the well-known contrarian billionaire investor and co-founder of PayPal and Palantir, has a long history of making bold and unconventional bets. A filing with the US Securities and Exchange Commission (SEC) revealed that Thiel-affiliated Founders Fund organizations exited ETHZilla after disclosing a 7.5% stake in 2025. ETHZilla is an Ether-focused digital asset treasury company.

The sell-off highlights broader market pressures on Ether treasury models, as ETHZilla shares have fallen sharply from summer 2025 highs amid falling Ether (ETH) prices. This comes at a time when investor appetite for leveraged crypto or equity exposure is waning.

This article explores why Thiel Founders Fund withdrew from ETHZilla and analyzes the risks of Ether treasury models, debt-based balance sheets and forced asset sales. It examines what this movement signals about the volatility, capital discipline and sustainability of public crypto treasury strategies.

ETHZilla: From Biotechnology to Ether Treasury

In July 2025, biotech company 180 Life Sciences made a bold change, raising $425 million to launch an Ether-focused crowdfunding strategy and rebranding as ETHZilla. It has positioned itself as a publicly traded vehicle to gain exposure to Ether with plans to build Ether holdings and deploy them in decentralized finance (DeFi) protocols and tokenized asset initiatives.

Just two months later, ETHZilla sought to raise an additional $350 million through convertible bonds to expand its resources and support further projects. Reports indicated that the company had more than 100,000 ETH in its balance sheet at one point.

The idea behind this effort was simple: secure funding, buy and hold Ether, generate potential revenue through staking or DeFi activities, and offer public shareholders the growth of Ether.

However, the strategy faced serious challenges as market conditions worsened.

You know that? In September 2022, Ethereum from proof of work (PoW) to proof of stake (PoS) in an event calledunification,” reducing its energy consumption by more than 99%. This is one of the most ambitious upgrades to any live blockchain.

ETHZilla’s Main Sale and Peter Thiel’s Exit

As crypto markets retreated from their previous highs, ETHZilla began to reduce its Ether position.

In December 2025, ETHZilla sold 24,291 ETH, raising about $74.5 million at an average price of about $3,068 per coin. The purpose of the sale was to pay off the debt. After the transaction, its Ether holdings reportedly dropped to around 69,800 ETH.

The sale of ETH was a major turning point for the company.

For a company built around the Ether treasury, being forced to return ETH to cover debt marked a fundamental vulnerability. Combining leverage with crypto volatility can lead to selling holdings at any time. A strategy originally designed to accumulate long-term patience can quickly turn into a struggle to stabilize the balance.

Shortly thereafter, Thiel Founders Fund reduced its holdings in ETHZilla to zero and, according to SEC filings, fully exited its position by the end of 2025.

What the 13G output chart does and doesn’t signal

A Schedule 13G filing shows a passive investment. An amendment that reports zero shares simply means that the filer no longer has enough to satisfy the disclosure threshold.

However, these documents do not reveal the reasons for the changes. They offer no insight into whether the selloff was driven by normal portfolio adjustments, risk reduction, valuation concerns, or broader doubts about Ether’s treasury approach.

In this case, time is also important. The full exit of Founders Fund comes shortly after Ether ETHZilla’s partial liquidation amid growing pressure for similar Ether-centric balance sheet strategies.

You know that? Before becoming synonymous with anti-macro betting, Peter Thiel invested $500,000 in Facebook in 2004 for a 10.2% stake, a deal that later became one of the Silicon Valley company’s biggest earnings.

Bitcoin vs Ethereum: Stores of Value and Hidden Layers of Complexity

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

Increased volatility is amplified by leverage

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

The search for yield creates new risks

Bitcoin treasury companies typically follow a direct hold-and-appreciate model. Ether-focused companies, on the other hand, often emphasize rewards or DeFi derivatives to increase revenue. However, this approach comes with trade-offs:

What promises higher profits can also increase operational complexity and systemic vulnerability.

More narrative and comprehension problems

Bitcoin treasury players benefit from a “digital gold” narrative based on scarcity and store of value appeal. However, Ether represents a dynamic and evolving ecosystem shaped by network upgrades, gas payment dynamics, changing regulatory viewpoints, and competition from other blockchains. This added complexity increases uncertainty and makes it more difficult for markets to price the strategy.

Ether accumulators in different ways

Not all companies that chose Ether funds reacted to the downturn in the crypto markets in a similar way.

Some of these companies continued to accumulate ETH, believing that the long-term expansion of the Ether network and service would outweigh the near-term price volatility. Others took the opposite route, liquidating all or a large portion of their holdings and suffering significant losses.

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

You know that? Unlike Bitcoin’s simple transaction model, Ether uses “gas” to measure computing performance. During the heyday of passive tokens (NFT), users sometimes paid hundreds of dollars in gas fees just to collect a digital collection.

Capital structure risks in volatile asset classes

Convertible debt structures can increase potential profits in bull markets by providing relatively low-cost leverage to acquire additional assets such as Bitcoin, effectively increasing returns as prices rise.

When companies trade at a premium to their net asset value (NAV), they can issue shares or convertibles to raise capital, which increase holdings and can raise them further.

However, in recessions, when stock discounts widen and crypto prices fall, the reversal can reverse:

In such a volatile environment, even long-term investors with large Ether portfolios may decide to take positions to limit low risk.

Opportunity cost and cleaner impact

Today’s institutional investors have more direct ways to gain exposure to Ether than in previous market cycles. Options include safe direct deposit solutions, regulated spot exchange-traded funds (ETFs), stacking products and complex derivatives. These structures can reduce the company’s exposure to operational, performance or management risks.

In contrast, investing through an equity portfolio around a leveraged crypto treasury strategy adds an extra layer of complexity and uncertainty. This exposure includes discretionary management decisions, financing and refinancing strategies, governance structures and capital allocation preferences that may differ from net 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 placed on a crypto-leveraged balance sheet may not seamlessly align with your long-term portfolio strategy or risk preferences. Recent developments, including the complete withdrawal from Ether’s treasury, such as ETHZilla, in the face of market pressures, highlight this selective approach to cryptographic exposure.