ETHZilla Dumps $40M in ETH to Buy Back Its Own Shares

Ethereum-focused digital asset trust ETHZilla has taken a bold step that’s turning heads across the crypto investing space.

The company announced plans to sell roughly $40 million worth of ETH to repurchase its own shares, a move rarely seen in the digital asset trust (DAT) sector, which traditionally focuses on long-term cryptocurrency accumulation.

The decision comes as ETHZilla looks to tackle a growing discount between its share price and net asset value (NAV), while also countering heavy short-selling pressure.

ETHZilla Selling ETH to buy back shares

In a series of posts on X, ETHZilla revealed that it has already spent $12 million repurchasing around 600,000 shares since October 24, under a larger $250 million buyback authorization.

The firm’s goal is to close a persistent 30% NAV discount, where shares trade significantly below the value of the Ethereum held in the trust.

“ETHZilla will leverage the strength of its balance sheet to support shareholders through buybacks, reduce shares available for short borrowing, and drive up NAV per share,” CEO McAndrew Rudisill stated. The trust still holds around $400 million in ETH, giving it substantial room to maneuver.

The ETH sale, executed when prices hovered near $3,900, came just before Ethereum’s climb to $4,216.99. ETHZilla’s stock responded swiftly, jumping 14.5% to close at $22.50 on Monday, followed by a 12% after-hours rally.

This wave of momentum suggests investors viewed the move as an effective short-term play to lift shareholder value and counter the bearish sentiment driven by short positions.

Rudisill added that the company views the move as “immediately accretive,” emphasizing that using part of ETHZilla’s holdings to repurchase discounted shares benefits existing shareholders without introducing debt.

A break from the DAT playbook

While the strategy appears to have boosted short-term confidence, it also represents a philosophical shift from the usual digital asset trust model, which typically prioritizes long-term cryptocurrency holding over asset liquidation.

Critics have been quick to point this out, with some users on X labeling the move a “clown decision” that runs against the ethos of decentralized asset accumulation.

Still, ETHZilla’s pivot isn’t without precedent. The firm’s buyback follows FG Nexus’s $200 million share repurchase earlier in October, signaling that DATs may be entering a new phase where protecting shareholder value outweighs rigid adherence to holding models.

As Reuters reported, similar efforts across the sector are being used to stabilize trust valuations and fend off aggressive short sellers.

Despite the debate, some analysts see potential upside. DeFi researcher @DefiIgnas suggested ETHZilla could use decentralized finance tools like Aave to deposit ETH and borrow stablecoins for buybacks, an approach that could preserve exposure to Ethereum while freeing liquidity for share repurchases.

For now, ETHZilla has made it clear it will continue buying back shares until the NAV discount narrows. The firm’s decision may have ruffled feathers among crypto purists, but it also points to a possible emerging shift, one where digital asset trusts are acting less like passive vaults and more like active, market-responsive institutions.

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