Peter Thiel has quietly unwound his bet on Ethereum-focused treasury firm ETHZilla, exiting a 7.5% position just months after the company’s stock collapsed from its speculative peak.
New regulatory filings with the U.S. Securities and Exchange Commission show that Thiel, through his venture vehicle Founders Fund, fully divested from ETHZilla in the fourth quarter of 2025. The move marks a sharp reversal from the enthusiasm that surrounded his initial investment, which had briefly turned ETHZilla into one of the market’s most aggressively hyped Ethereum-adjacent equities.
At the height of the frenzy in August last year, ETHZilla’s stock (ticker: ETHZ) reached an effective high of $174.60 per share. That peak price already accounts for the company’s 1‑for‑10 reverse stock split in October, a corporate maneuver often used by distressed companies to prop up a tumbling share price and maintain listing standards.
Since then, ETHZilla has undergone a brutal re-rating. As of the latest trading session, shares change hands for just $3.62, implying a collapse of roughly 98% from last year’s top. The wipeout has been so severe that even the broader volatility of the crypto market looks modest by comparison.
Ethereum itself-the blockchain ecosystem to which ETHZilla is financially tethered-has certainly not been immune to selling pressure. The second-largest cryptocurrency by market capitalization has slipped nearly 61% from its August all-time high of $4,946 and recently hovered around $1,944. But ETHZilla’s plunge far exceeds the underlying asset’s drawdown, suggesting deeper concerns around the firm’s business model, risk controls, and investor expectations.
ETHZilla positioned itself as a specialized Ethereum treasury manager, offering exposure to ETH and related instruments through a publicly traded stock rather than direct crypto ownership. For traditional or institutional investors wary of direct custody, this type of structure was marketed as a convenient gateway into Ethereum’s growth narrative. Thiel’s entry was widely interpreted as a vote of confidence in both the company’s strategy and the broader thesis that Ethereum would become the financial backbone of Web3.
The initial reaction was euphoric. News of Founders Fund’s stake triggered a surge in trading volume and propelled ETHZilla into the spotlight. Retail traders piled in, speculating that Thiel’s reputation as an early backer of transformative technology-he was a co-founder of PayPal and an early investor in major tech firms-would help validate ETHZilla as a long-term winner in the digital asset infrastructure space.
Yet the fundamentals struggled to keep pace with the story. As Ethereum entered a prolonged correction, the value of ETHZilla’s on-balance-sheet assets deteriorated. If the firm was heavily exposed to unhedged ETH price movements or concentrated on more speculative Ethereum ecosystem bets, the drawdown in crypto markets would have amplified the strain on its financial statements and investor sentiment.
The timing of the reverse stock split in October underscored these pressures. By consolidating shares at a 1‑for‑10 ratio, ETHZilla effectively lifted its nominal share price without changing its underlying value-a strategy often employed when a stock risks breaching minimum price requirements on major exchanges. Although such corporate actions can buy time, they rarely resolve the structural issues that drove the stock down in the first place.
Thiel’s exit in the fourth quarter suggests that patience ran out. Large investors typically weigh both the long-term thesis and the opportunity cost of capital. A 98% decline from the peak leaves little room for defending a position to limited partners when alternative opportunities, even within crypto, may offer more favorable risk-reward profiles. Whether the decision came from a reassessment of ETHZilla’s execution, a shift in the macro view on Ethereum, or broader portfolio rebalancing, the message to the market is clear: one of the most prominent backers is no longer willing to ride out the turbulence.
This episode highlights a key difference between buying crypto assets directly and buying equity in crypto-exposed companies. Ethereum’s 61% drop is severe, but it is still roughly in line with historical crypto drawdowns that long-term holders have endured multiple times. An equity like ETHZilla, however, layers operational, governance, and strategic execution risk on top of price volatility in the underlying token. If management misjudges leverage, treasury allocation, or hedging strategies, shareholders can suffer far steeper declines than token holders.
For investors, the ETHZilla saga serves as a cautionary case study in how quickly sentiment can pivot in crypto-adjacent equities. The presence of a high-profile name such as Peter Thiel can fuel momentum, but it does not immunize a business from market cycles or internal missteps. Early excitement over “institutional validation” can quickly be replaced by scrutiny of balance sheets, cash burn, and the sustainability of revenue streams in a down market.
It also exposes the fragility of narratives built around treasury-style vehicles that promise simplified exposure to digital assets. These companies often thrive during bull markets when asset values rise and demand for indirect exposure is strong. In bear phases or deep corrections, they must prove that their value proposition extends beyond simply holding a volatile asset with additional management fees levied on top.
Another crucial angle is risk management. A robust treasury firm dealing with inherently volatile assets like Ethereum is expected to deploy hedges, diversification strategies, and conservative leverage policies. If ETHZilla’s decline was primarily the result of an unhedged directional bet on Ethereum, it raises questions about how sophisticated its risk framework truly was-and whether investors were effectively paying public-market multiples for a leveraged ETH position they could have constructed more simply on their own.
The broader Ethereum ecosystem will continue to attract both venture capital and public-market interest, especially as developers build new applications in decentralized finance, tokenization, and on-chain infrastructure. However, the ETHZilla case reminds market participants that not all Ethereum-linked plays are created equal. The underlying protocol can be resilient and active, while individual companies built around it can still struggle or fail if they mismanage growth, risk, or capital structure.
Thiel’s departure does not, by itself, signal an abandonment of crypto or Ethereum from the wider venture capital community, but it does reflect a more mature, selective environment. Early-stage or speculative bets are now judged less on branding and more on execution, transparency, and resilience across cycles. For founders, the lesson is stark: marquee investors can accelerate visibility, but they cannot substitute for sound governance and disciplined financial strategy.
For retail and institutional investors analyzing similar opportunities, several practical takeaways emerge:
– Distinguish between exposure to a token and exposure to a company that holds or builds around that token.
– Examine how the firm manages treasury risk, including hedging, diversification, and leverage.
– Treat reverse stock splits and rapid run-ups on news of high-profile investors as signals to investigate more deeply, not as validation in themselves.
– Compare the drawdown of the related crypto asset with the company’s share price performance to gauge whether you’re taking on disproportionate additional risk.
In the end, ETHZilla’s 98% collapse relative to Ethereum’s 61% pullback lays bare the asymmetry between narrative and reality. Thiel’s exit crystallizes that divergence. What began as a headline-grabbing endorsement of an Ethereum treasury specialist has turned into a reminder that in crypto-linked equities, star power and bullish narratives can evaporate far faster than they are built-while losses, once realized, are stubbornly permanent.