Why Peter Thiel’s Founders Fund Walked Away from Ether Treasury Bets

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Founders Fund has fully exited Etzilla after previously holding a 7.5% stake. SEC filings show entities connected to Peter Thiel have reduced their ownership to zero by the end of 2025, marking a significant retreat from the ether-centric public treasury strategy.

Etzilla's pivot from biotech to Ether Treasury was aggressive. After raising $425 million and later seeking $350 million in convertible bonds, he accumulated over 100,000 ETH, positioning himself as a leveraged equity proxy for Ether exposure.

Debt-driven models can force crypto sales at inconvenient times. ETZilla showed structural weakness by selling 24,291 ETH in December 2025 to meet debt obligations. Leverage coupled with crypto volatility triggers asset depletion during a downturn.

Ether treasury systems have more operational complexity than Bitcoin treasuries. Ether-centric models often follow staking and DeFi products by introducing smart contracts, liquidity and associated risks that bitcoin “only” treasury models avoid.

Peter Thiel, the famous contrarian billionaire investor and founder of PayPal and Palantir, has a long history of bold, unconventional bets. A filing with the US Securities and Exchange Commission (SEC) confirmed that TL-linked founding fund entities have pulled out of Itzilla after they announced they would have a 7.5% stake in the company by 2025. Etzilla is a digital asset treasury focused on Ether.

The sell-off highlights broader market pressures on Ether's treasury models as ETHZilla stock has fallen from its summer 2025 all-time high for Ether (ETH). This comes at a time when investors are losing exposure to leveraged or equity-packaged crypto.

This article examines why the TL Founders Fund exited Etzilla and the risks of using ether treasury models, debt-based balance sheets, and forced asset sales. The movement examines what it means for volatility, capital discipline and the sustainability of public crypto-treasury strategies.

ETHZilla: From Biotech to Ether Treasury

In the year In July 2025, biotech company 180 Life Sciences made a bold move, raising $425 million to launch an ether-focused treasury strategy and naming it ETHZilla. It has positioned itself as a publicly traded vehicle for exposure to Ether, aiming to build Ether holdings and deploy decentralized finance (DeFi) protocols and token asset initiatives.

Two months later, Etzila sought an additional $350 million in convertible bonds to expand its reserves and finance additional projects. According to reports, the company has more than 100,000 ETH on its account at one point.

The idea behind the effort was straightforward: secure funding, buy and hold Ether, generate potential returns through staking or DeFi activities, and give public shareholders exposure to Ether's growth.

However, the strategy faced significant challenges as market conditions deteriorated.

Did you know this? In September 2022, Ethereum transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in an event called “The Merger,” reducing its energy consumption by more than 99 percent. It is one of the largest improvements ever attempted directly on the blockchain.

Itzilla's main sale and outlet of Peter Thiel

As the crypto markets retreated from their previous highs, ETZilla began to reduce its Ether position.

In the year In December 2025, ETZilla sold 24,291 ETH, bringing in about $74.5 million at an average price of $3,068 per coin. The purpose of the sale is to meet debt repayments. Following the transaction, Ether holdings are said to have dropped to around 69,800 ETH.

The sale of ETH marked a significant turning point for the company.

For a company built around the ether treasury, being forced to unload ETH to cover debt highlighted a fundamental vulnerability. Combining energy with crypto volatility can trigger a sell-off of holdings at any time. A strategy initially designed for patient, long-term accumulation quickly turns into a struggle to maintain balance.

Not long after, TL Founders Fund reduced its ownership in ETZilla to zero and will exit the position entirely by the end of 2025, according to SEC filings.

13G exit signs what kind of schedule is and what is not

Filing a 13G schedule represents a passive investment. An update that reports zero shares simply means that the file is not large enough to meet the disclosure threshold.

These documents, however, do not explain the reasons behind the change. They give no insight into whether the sell-off stems from routine portfolio adjustments, risk reduction, valuation concerns or broader doubts about Ether Treasury's approach.

It is also important to give time in this matter. The full exit of the founders' fund comes shortly after Etzilla's partial ether liquidation, putting pressure on similar ether-centric balance sheet strategies.

Did you know this? Before it became synonymous with contrarian macro betting, Peter Thiel invested $500,000 in Facebook in 2004 for a 10.2% stake.

Bitcoin vs. Ether Treasurys: Store of Value and Hidden Layers of Complexity

While comparisons to Bitcoin (BTC) treasury strategies are inevitable, Ether introduces levels of complexity that Bitcoin treasuries typically avoid.

Higher flexibility is advantageously added.

Ether tends to experience higher price volatility driven by sentiment compared to Bitcoin. This feature stems from Ether's role as a digital asset and fuel for the programmable blockchain platform. When treasury companies rely on convertible debt or other forms of leverage, losses can result in forced sales.

Product pursuit introduces new risks

Bitcoin treasury companies often follow a direct hold and appreciation model. In contrast, Ether-focused companies often focus on crowdfunding rewards or DeFi products to improve returns. However, this approach comes with tradeoffs:

Promises of high returns can add operational complexity and system vulnerabilities.

Advanced narrative and perspective tests

Bitcoin treasury players benefit from the lack of “digital gold” narrative and an attractive store of value. Ether, however, represents a dynamic, evolving ecosystem shaped by network upgrades, gas fee flexibility, changing regulatory perspectives, and competition from other blockchains. This added complexity increases uncertainty and causes markets to price out the strategy.

Ether concentration following different ways

Not all companies that have opted for Ether treasuries have reacted the same way to the collapse of the crypto markets.

Some of these companies continue to accumulate ETH, believing that Ether's long-term network expansion and utility outweigh recent price volatility. Others took the opposite route, liquidating all or a significant portion of their holdings and realizing huge losses.

This difference in approach shows that the Ether Treasury model is not inherently flawed or broken across the board. Its sustainability depends on factors such as utilization levels, risk controls and resilience to market cycles.

Did you know this? Like Bitcoin's simple transaction fee model, Ether uses “gas” to measure computation. During the peak of the non-refundable token (NFT) boom, users sometimes paid hundreds of dollars in gas fees just to complete digital collections.

Capital structure risks in variable asset classes

Convertible debt structures can increase leverage in bull markets by offering relatively low costs to acquire additional assets such as bitcoin, amplifying the effects as prices rise.

When companies trade at a premium to their net asset value (NAV), they may issue equity or alternative instruments to raise capital, which can increase holdings and potentially rise further.

However, in downturns, when equity offers widen and crypto prices fall, the feedback loop can be reversed:

In this type of bearish environment, even long-term investors with large Ether portfolios may decide to trim or exit positions to limit the downside risk.

Opportunity cost and cleaner exposure

Today's institutional investors have more direct ways to gain Ether exposure than in previous market cycles. Options include safe direct protection solutions, leveraged spot exchange-traded funds (ETFs), savings-enabled products and advanced derivatives. These structures can reduce exposure to company-specific operational, performance or governance risks.

In contrast, investing in an equity portfolio around an approved crypto treasury strategy adds additional complexity and uncertainty. This includes exposure to management decisions, financing and restructuring strategies, governance structures and capital allocation priorities that may differ from net asset performance.

Founders Fund is a historically focused firm focused on supporting high-growth operating companies with scalable, technology-enabled business models. A vehicle focused on leveraged crypto balances may not fit with the long-term portfolio strategy or risk preferences. Recent developments, including the complete withdrawal from Ether Treasury plays in market pressures such as ETZilla, have emphasized this selective approach to crypto exposure.