The Traditional Reserve Company Model
Cryptocurrency reserve companies have historically accumulated crypto assets with a commitment to avoid selling. Their established narrative revolves around continuously amassing more cryptocurrency, leveraging equity offerings for borrowing, and subsequently using the acquired cash to expand their reserves. However, this established cycle appears to be facing a significant disruption.
The concept of reserve companies beginning to sell their accumulated cryptocurrencies can be perceived as alarming. Notably, Michael Saylor's strategy involved amassing a Bitcoin reserve worth tens of billions without ever selling any BTC, and many other companies have aimed to replicate this successful approach. The typical steps in this model include acquiring cryptocurrency through borrowing, boosting the company's share value, issuing more shares, purchasing additional cryptocurrency with the cash obtained, thereby increasing company value, and repeating this cycle as cryptocurrency prices and share issues rise.
ETHZilla's Deviation from the Norm
In a recent development, ETHZilla announced the sale of $40 million worth of ETH to fund share buybacks, a move that directly contrasts with Saylor's long-standing strategy. In a last-minute announcement on October 24, 2025, the company stated that since the sale, they have repurchased approximately 600,000 common shares for about $12 million as part of a $250 million share buyback program previously approved by the current board. ETHZilla plans to utilize the remaining proceeds from the ETH sale for further buybacks, with the intention of continuing to sell ETH until the discount in Net Asset Value (NAV) normalizes.
ETHZilla’s Chairman and CEO, McAndrew Rudisill, commented on the strategy: "We are leveraging the strength of our balance sheet, including reducing our ETH holdings, to execute share buybacks. While our shares trade at a significant discount to NAV, we expect the cash from the ETH sales will immediately enhance value through these buybacks."
Rudisill further elaborated on the strategic benefits: "By seizing opportunities to conduct share buybacks while our stocks trade below NAV, we plan to increase the company’s per-share NAV, reducing the number of shares available for lending/borrowing activities."
Implications for the Crypto Market
Despite the sale, ETHZilla continues to hold $400 million in ETH, although the per-share ETH value remains below the company's target. This significant sale by ETHZilla offers a potential projection of future insolvency for other crypto reserve companies, directly challenging the long-held narrative of perpetual cryptocurrency accumulation. It also provides valuable insights into how new bear markets might commence.
This unexpected move on October 27 could be remembered as the first significant signal of a potential shift in the market dynamics for cryptocurrency reserve companies.