Ethereum Foundation’s treasury plan – Will a 66% spending cut boost ETH’s value?

• Ethereum Foundation’s new treasury policy aims to cut expenditure from 15% to 5%. 
• The Foundation will support ‘audited’ DeFi protocols to advance its treasury strategy. 

The Ethereum [ETH] Foundation has unveiled a treasury plan to ensure enough liquidity and significantly reduce operational expenses (opex) from 15% to 5% (nearly 66% cut).  

Under its updated treasury policy, the EF elaborated, 

“Current targets 15% of treasury for annual opex over 2.5 years. We intend to reduce annual opex roughly linearly over the next five years, ending at a long-term 5% baseline that is common for endowment-based organizations.”

Part of the strategy would include conservative approaches to gain ‘reasonable returns’ on its investment without risking liquidity that could undermine EF’s operations. 

EF to leverage DeFi for better returns

Hsiao-Wei Wang, a director of the EF, noted that they will favor ‘audited’ DeFi protocols for reasonable returns on the foundation’s reserves. 

“We favor audited, battle-tested DeFi protocols that are trust-minimized and composable. Rather than chasing high yields, we focus on conservative strategies with high liquidity and low systemic risk.”

These would include tokenized RWAs, liability-matched reserves, and short-term liquidity assets, Wang added. 

But he highlighted that they would only focus on DeFi protocols that advance ‘DeFipunk’ values — privacy, decentralization, and self-sovereignty. Several market watchers hailed the update as bullish. 

As of late 2024, the EF had $970.2 million in its treasury split between crypto assets ($788M) and non-crypto assets ($181M), at the time. Notably, ETH accounted for 99% of its crypto reserves.

Source: Arkham

At press time, Arkham Intelligence data showed the foundation had 216.15K ETH worth $565.18 million. 

The treasury update follows an aggressive overhaul in the non-profit organization and massive interest in the ETH corporate strategy.

In fact, the corporate reserve trend has gobbled up 981K ETH, worth over $2.5B, drawing parallels to Strategy-led Bitcoin [BTC] accumulation frenzy. 

Will the FOMO drive ETH value upwards? Most certainly, if market sentiment remains positive. 

According to Glassnode, ETH’s Realized Cap surged from $240B to $247.5B, meaning $7.5B capital flowed into the asset between May and early January.

Put differently, the ongoing $2.3K-$2.8K range has sparked strong accumulation.

Source: Glassnode

For analyst Mathew Hyland, ETH was on the verge of a breakout, going by the tight constriction of the Bollinger Bands. In case of an upside breakout, the $3K psychological level could be tagged. 

Source: Mathew Hyland/X