Vitalik Buterin Backs Ethereum Treasury Efforts While Warning of Leverage Risks

Ethereum co-founder Vitalik Buterin has expressed support for the growing number of ETH treasury companies, noting that they create new opportunities for a wider pool of investors.

Speaking on the Bankless podcast on August 7, Buterin said companies building an ETH Treasury provide valuable services to the market.

ETH Price Dip Could Trigger Wave of Forced Liquidations

He explained that these firms broaden investor access, offering more pathways for people with varying financial circumstances to gain exposure to Ethereum without the need to purchase and hold the token directly.

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This model reflects what is already common in the Bitcoin treasury space. Bitcoin and Ethereum remain the top choices for corporate crypto holdings, with billions invested.

Michael Saylor’s Strategy controls the largest Bitcoin treasury, with 628,791 BTC holdings. This is followed by MARA Holdings with 50,639 BTC. More recently, Metaplanet purchased an additional 463 BTC, bringing its total to 17,595 BTC, securing the seventh-largest corporate treasury spot.

However, Buterin balanced his support with a clear warning. He cautioned that the ETH Treasury trend could become dangerous if it turns into what he called an “overleveraged game.”

In finance, overleverage happens when too much debt or borrowed capital is used to increase returns. While leverage can amplify gains, it also magnifies losses.

If ETH treasury firms borrow heavily to increase their positions, even a small drop in ETH’s price could trigger margin calls and forced asset sales, commonly known as forced liquidations.

In such a chain reaction, those liquidations would flood the market with ETH, pushing prices even lower and eroding investor confidence in Ethereum.

This feedback loop is precisely the “game” Buterin warns against, where aggressive borrowing and risky bets spiral into a self-reinforcing crash.

He added that if, three years from now, someone told him that ETH treasury securities caused Ethereum’s downfall, he would assume it was because the market had become overleveraged in this way.

Ethereum Targets $4,000 as ETH Treasury Demand Surges

Ethereum’s price climbed above $3,900 on Friday, driven by fresh institutional buying and unprecedented inflows into ETH treasury companies and exchange-traded funds (ETFs).

The price touched $3,952 before settling near $3,909.

Analysts believe momentum is strong enough that a test of the $4,000 level could be just around the corner.

A major spark came from SharpLink Gaming’s announcement of a $200 million stock sale, with proceeds earmarked for expanding its ETH Treasury.

SharpLink already has more than 521,000 ETH, valued at over $2 billion. It ranks second only to BitMine Immersion Technologies, which holds 833,100 ETH worth about $3.2 billion.

Other companies are also reshaping their strategies around Ethereum.

On July 17, Nasdaq-listed Bitcoin miner BTC Digital (BTCT) revealed it was abandoning its Bitcoin-focused approach, converting all current and future BTC holdings into Ethereum.

In a similar move, Fundamental Global filed a $5 billion shelf registration with the U.S. Securities and Exchange Commission (SEC) to build its own ETH Treasury..

Institutional demand is being amplified by surging interest in ETH-backed ETFs. Data from SoSoValue shows that cumulative net inflows into U.S.-listed Ethereum funds have reached $9.35 billion.

Leading issuers such as BlackRock, Grayscale, and Fidelity have been key players, with BlackRock’s ETHA ETF alone attracting more than $100 million in a single day, pushing its net assets over $10 billion.

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With ETH treasury holdings swelling across corporate balance sheets and ETFs capturing record capital levels, market sentiment is increasingly bullish. Traders are now closely watching the $4,000 price barrier.