Is the "coin hoarding" model bankrupt? MSTR has "paused coin purchases," while Thiel's ETHZilla has "sold coins to repay debts."

The cryptocurrency accumulation strategy that was popular in the market in the first half of this year is facing a turning point.

According to documents submitted to the U.S. Securities and Exchange Commission on Friday, ETHZilla, backed by billionaire Peter Thiel, has sold $74.5 million worth of Ethereum tokens to pay off debt, while the Strategy that pioneered this model has also paused Bitcoin purchases this week to bolster its cash reserves.

According to the documents, ETHZilla will continue to evaluate various financing strategies, including selling Ethereum and equity financing. This is the company's second sale of Ethereum in four months, having previously sold approximately $40 million worth of Ethereum for stock buybacks at the end of October.

Meanwhile, Strategy founder Michael Saylor has increased the company's cash reserves to $2.19 billion over the past week and has stopped purchasing Bitcoin.

The company previously stated that it had built cash reserves to pay off the high interest generated from previous securities issuances. According to TD Cowen analyst Lance Vitanza, Strategy needs to pay approximately $824 million in interest and dividends annually.

These developments indicate that the business model of accumulating cryptocurrencies through publicly listed companies is facing challenges. Bitcoin has fallen about 30% since reaching an all-time high in early October, and Strategy's stock price has plummeted over 50% during the same period.

(Strategy's stock price has dropped 50% in the past three months)

ETHZilla's Shift: From Accumulating Coins to Selling Coins

ETHZilla was a follower of the digital currency treasury strategy just four months ago.

The company, headquartered in Palm Beach, Florida, was formerly known as 180 Life Sciences Corp. and announced on August 18 that it was transforming from a biotech company into a digital asset management company focused on accumulating Ethereum. The company's stock price soared from $30 before the announcement to over $100.

But the good times didn't last long. According to documents submitted to the SEC on Monday, ETHZilla has sold $74.5 million worth of Ethereum to pay off senior secured convertible notes.

As of December 19, the company holds approximately 69,800 Ethereum tokens, valued at about $210 million at current prices. On Monday at 3:14 PM New York time, ETHZilla's stock price fell about 7.5% to $6.38.

(ETHZilla's stock price fell by as much as 9% during the session)

The company stated that it will continue to evaluate various financing strategies, including the sale of Ethereum and equity issuance, to complete its business plan, including "tokenization of real-world assets." According to media reports, an ETHZilla spokesperson declined to comment further beyond the documents on Monday

Strategy Suspends Purchases to Bolster Cash Reserves

The company that pioneered this business model, Strategy, has also hit the pause button.

According to a filing submitted to the SEC on Monday, the company raised $748 million through the sale of common stock in the week ending December 21, increasing its cash reserves to $2.19 billion, but has suspended Bitcoin purchases.

In the previous two weeks, the company had purchased approximately $2 billion in Bitcoin, bringing its total holdings to about $60 billion.

Earlier this month, Strategy created a $1.4 billion reserve to pay future dividends and interest, attempting to alleviate market concerns that the company might be forced to sell Bitcoin amid a continued decline in token prices.

According to TD Cowen analyst Lance Vitanza, Strategy needs to pay approximately $824 million annually in interest and dividends, while the company's software business cannot generate sufficient free cash flow to cover these expenses. Bitcoin itself does not pay dividends.

On Monday, the company's mNAV was approximately 1.1, a key valuation metric that compares enterprise value to Bitcoin holdings, which had previously traded at a significant premium.

Business Logic Under Scrutiny

Strategy's strategy of accumulating Bitcoin through a publicly listed company attracted hundreds of companies to follow suit in the first half of this year.

ETHZilla has mimicked Strategy's playbook, attempting to position itself as an Ethereum treasury company.

However, this model has always been difficult to explain: why should tokens be more valuable simply because they are held by a publicly listed company? Especially after the cryptocurrency prices plummeted in early October, this logic becomes even less tenable.

As the crypto winter continues, the sustainability of this business model is facing severe challenges.

Billionaire Peter Thiel has multiple investments in the cryptocurrency space. In addition to ETHZilla, he is an early investor in the cryptocurrency exchange Bullish. Reports indicate that Thiel-backed crypto-friendly bank startup Erebor is expected to raise $350 million at a valuation of $4.35 billion