Billion-dollar Ethereum DAT backed by Huobi founder collapses amid market downturn

According to reports, the $1 billion Ethereum DAT that leading Asian crypto investors, including Huobi’s Li Lin, proposed will no longer happen, and the committed capital has been returned. 

Had the plans gone through, the new trust could have grown into one of the largest dedicated institutional vehicles for Ethereum accumulation, rivaling the holdings of existing funds such as BitMine, SharpLink Gaming, and Grayscale’s Ethereum Trust.

Why the Huobi-linked billion-dollar DAT was called off

The proposed billion-dollar DAT was expected to be a success because of the entities involved, including Li Lin, who, through Avenir Capital, has been able to build a solid track record in ETFs.

Not much is known about why the project was discontinued. However, Wu Blockchain has claimed that sources familiar with the proceedings said the main reason the plan was halted was due to the market downturn that came after the sharp October 11 sell-off. 

The project was to be a corporate treasury vehicle with the sole purpose of accumulating and holding large amounts of ETH, a strategy similar to the one companies like Strategy, which hold Bitcoin, have employed. 

The person who spearheaded the effort was Huobi’s founder, Li Lin, and he had the backing of a number of Asia’s earliest and most influential Ethereum backers, including Shen Bo, co-founder of Fenbushi Capital; Xiao Feng, chairman and CEO of HashKey Group; and Cai Wensheng, founder of Meitu Inc. 

The project, while still under development, raised around $1 billion, including $200 million from Li’s Avenir Capital and another $500 million from Asian institutional investors such as HongShan Capital Group. The consortium was also said to be in talks to acquire a Nasdaq-listed shell company that would facilitate the structure. 

The treasury was expected to be a success owing to the relative success of Bitcoin and its treasuries; however, even back then, while the plan was being drafted, sources close to the deal warned that details of the plan were still fluid and subject to change before launch. 

Sharplink took damage from the recent sell-off 

Sharplink has often treated dips on ETH as buying opportunities, but after ETH dropped more than 20% in November, the company, which was the first publicly listed company to use Ethereum (ETH) as its primary reserve asset, has made some moves that have people worried it may be selling to cut losses or rebalance its holdings.

The latest Sharplink move to trigger speculation was when the company moved its ETH to an OTC exchange. According to Onchain Lens, citing data from Arkham, a Sharplink wallet transferred 5,442 ETH — worth approximately $17.02 million — to Galaxy Digital, a major digital asset management platform.

Data from the Strategic ETH Reserve (SER) has shown that Sharplink currently sits on $479 million in unrealized losses due to ETH’s recent price decline. CryptoQuant data indicates an even larger figure, exceeding half a billion dollars.

According to CoinGecko’s data, Sharplink’s average purchase price is $3,609, with its most recent purchase being one month ago, after which it has not added to its position. ETH is now falling toward the $3,000 level, which is what makes arguments of a rebalancing very strong.

“With ETH trading near this cost basis, this move strongly suggests a possible OTC sale or a major portfolio rebalancing to reduce risk exposure,” investor Rose commented.

With its current holdings of 859,853 ETH, which represents 0.712% of the total ETH supply, valued at more than $2.6 billion, Sharplink is the second-largest ETH-holding institution after Bitmine. Overall, ETH accumulation activity among DATs declined in November, with purchases no longer occurring daily, as it was in previous months. 

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