Ethereum Foundation's Treasury Drops 39% Amid ETH Price Decline, Selling Spree

The Ethereum Foundation (EF) has recently disclosed a significant decline in its treasury value, dropping from $1.6 billion in March 2022 to $970.2 million as of October 31, 2024. This 39% decrease is attributed to annual expenditures of around $120 million and a 22% drop in the price of ETH over the past two years. The foundation's treasury is heavily reliant on cryptocurrency holdings, with 81.3% of its assets in ETH. This dependence increases its vulnerability to market fluctuations, as the volatile nature of ETH prices could negatively impact its operational needs during prolonged downturns.

The foundation's recent transactions have sparked controversy regarding its liquidity management. In December 2024, the EF exchanged 100 ETH for 374,334 DAI, in addition to the 4,266 ETH it had already sold throughout the year. The total revenue from these sales was approximately $12.21 million, with an average price of $2,796 per ETH. These sell-offs suggest that the foundation is aggressively managing its treasury to meet expenses. However, if ETH prices continue to decline, the foundation may be forced to sell more ETH at lower prices, further undermining its financial health. A sharp decline in prices below major support levels could restrict the EF from maintaining its existing funding commitments.

While the Ethereum Foundation has not disclosed any debts, its treasury policy raises concerns over liquidity issues. In January 2025, the foundation invested 50,000 ETH (approximately $165.3 million) in Aave, a decentralized finance (DeFi) lending protocol. This decision was made to generate yield and improve treasury performance. However, it also introduces additional risks. If the price of ETH falls significantly below its liquidation level, it could trigger automatic asset sales by the foundation, shrinking the treasury value and sending shockwaves through the market.

To mitigate these risks, the Ethereum Foundation has implemented several strategic measures. It has been selling parts of its ETH holdings for stablecoins such as DAI to minimize exposure to ETH price volatility. The foundation is also timing the sale of its ETH thoughtfully to control cash flow without causing further