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Boosted by jsonstein@masto.deoan.org ("Jeff Sonstein"):
molly0xfff@hachyderm.io ("Molly White") wrote:

A fourth Trump family-connected crypto treasury company is in the works. This one will establish a treasury for WLFI, and the deal has provided the first “price” for the token. At this price, President Trump’s holdings are valued (on paper) at $3.15 billion.

The explosion in crypto treasury companies is making experts in and outside of crypto nervous. A crypto CEO described the “huge” risk based on assets that have “almost nothing backing [them]”. Crypto analysts at Galaxy have compared them to the 1920s investment trust collapse.

Trump business interests Trump’s World Liberty Financial has announced it will be jumping aboard the crypto treasury bandwagon — because apparently the Trumps need to be involved with a fourth.d Using the Nasdaq-listed ALT5 Sigma Corporation, they will set up a crypto treasury with World Liberty’s own WLFI token. ALT5 plans to sell 200,000 new shares to fund the purchase of $1.5 billion worth of WLFI tokens, and add Eric Trump and World Liberty Financial executives Zach Witkoff and Zak Folkman to its board. All three have a financial interest in World Liberty Financial, presenting a blatant conflict of interest in their roles on the ALT5 board. The deal provides the first valuation for the WLFI token, which cannot yet be resold, though the project just voted to allow secondary trading [I88]. Trump personally holds 15.75 billion WLFI tokens, suggesting a paper valuation of $3.15 billion.34 Eric and Donald Trump Jr. are part owners of the American Bitcoin mining and treasury company, and Eric is a co-founder and Chief Strategy Officer; the Trump majority-owned Trump Media & Technology Group just acquired a $2 billion bitcoin treasury; Eric Trump is on the board of the Metaplanet treasury company. Donald Trump Jr. also owned a large stake in the Thumzup Media treasury company, though he seems to have recently sold it.52 ↩
The glut of crypto treasury companies is continuing to draw concern [I86, 84]. Eric Benoist of the investment bank Natixis CIB told the Financial Times, “My main problem with this strategy is that I don’t really understand where it ends. The company is in a loop where it has to continually feed that loop with additional purchases, go back to the market to purchase more — this cycle has to continue to justify the premium.” Hmm, why is that description ringing a bell? And why is that bell a klaxon? Even crypto executives are getting uneasy. The FT quotes a crypto market maker CEO who told them, “You’re injecting a huge amount of risk into a system that, in the end, has almost nothing backing it except the continued appreciation of the asset.” Screenshot of I Think You Should Leave episode, where the focus group man states “Oh my God, he admit it!”
A report by blockchain firm Galaxy Digital warns of structural risks from the proliferation of such companies: “When hundreds of firms adopt the same one-directional trade (raise equity, buy crypto, repeat), it can become structurally fragile. A downturn in any of these three variables (investor sentiment, crypto prices, and capital markets liquidity) can start to unravel the rest.” Though the report describes the risk as “largely theoretical” (“for now”), it compares the potential spiral to the 1920s investment trust crash:35 Trusts traded at premiums to NAV, issued shares, and used the proceeds to buy more assets. When sentiment turned, those same mechanics amplified the downside. Collapsing premiums choked off access to capital while leverage magnified losses on falling assets. These cascading failures were an accelerant of the 1929 crash and subsequent Great Depression. [Digital Asset Treasury Companies] may be more transparent and better regulated than 1920s trusts, but the mechanics of mNAV-driven capital formation are eerily similar.