The history of Evergrande’s collapse, ultimately triggered by debt risks, has led some readers to draw parallels with the potential similar risks faced by some listed crypto treasury companies today.

A couple of days ago, Vitalik also mentioned this risk in his Twitter comments. This risk is indeed worth paying close attention to, even if it is not yet an explicit risk at the moment. However, I can’t help but worry whether the increasingly aggressive operations of these companies might trigger this risk in the future.

The book Classic Case of Value Investing: China Evergrande was published at the time to demonstrate the author’s firm optimism about Evergrande.

To prove this "firmness," the author meticulously listed the debt risks of Evergrande at various stages as assessed by various investment banks and institutions in the market, using this to forcefully argue for his continued bullish stance.

Looking back at this book today, what stands out is not its conclusions but the series of risks it listed—these risks, in fact, serve as more valuable historical clues.

All these risks can be summarized as follows:

Evergrande’s approach was to raise funds through going public, issuing new shares, issuing perpetual bonds, and mortgaging assets, while deliberately extending payment cycles and splitting payments into multiple installments to delay obligations.

Why? To pursue scale. The result? It became trapped in a debt spiral with no way out.

To mask this situation, Evergrande aggressively borrowed money to repurchase shares and prop up its stock price to maintain investor confidence. On the other hand, it aggressively diversified and built up its corporate image to showcase its strength.

This series of actions appeared to "crush" short-sellers repeatedly, "counter" the pessimists, and dazzle a large number of domestic investment banks, brokerages, and investors.

In contrast, renowned overseas investment banks (such as Goldman Sachs) remained exceptionally清醒 (sober), unimpressed by these tactics, and consistently focused on its deteriorating debt and cash flow.

Looking back at this history now, the method to pierce through the facade of such companies and get to their core is actually very simple:

Use common sense to judge.

What common sense?

Ask whether everything it does weakens its core business, increases debt, reduces free cash flow, makes operations increasingly strained, or makes the company less capable of coping with external changes.

All other superficial things (soaring stock prices, grand advertisements, ubiquitous celebrity endorsements...) are merely temporary and play no decisive role.

We can apply the same standards to evaluate the current state of listed crypto treasury companies.

These companies are currently raising funds to purchase crypto assets. Their fundraising methods are essentially threefold: issuing shares, issuing convertible bonds, or directly issuing bonds.

Among these three methods, equity financing is relatively controllable in terms of risk, while direct borrowing is much more concerning.

Because once a company’s debt becomes unsustainable, it will inevitably be forced to sell its crypto holdings to repay debts. And once such selling occurs, it could trigger a chain reaction of crypto asset collapses.

So, to assess whether these companies are at risk, I look at whether their free cash flow can sustain operations and cover debt risks.

For companies holding Bitcoin, since Bitcoin does not generate interest, this part of the business does not produce cash flow. For companies holding Ethereum, staking Ethereum currently yields about 3%–4%, so their Ethereum holdings can generate some cash flow through staking.

Comparing the two, it might seem that Ethereum-holding companies, with their cash flow, face lower risks. But I actually think their hidden risks might be greater.

Because Ethereum’s price creates a leverage effect on staking rewards: when Ethereum rises, holders enjoy both fixed staking yields and the appreciation of the "base currency."

This effect can easily fuel greed and complacency among operators. If the operators are already aggressive and lack discipline, the situation becomes dangerous.

MicroStrategy currently carries some debt and indeed faces certain risks. But among Ethereum treasury companies today, one is particularly concerning. This company has been loudly proclaiming its goal is to "hold 5% of all Ethereum."

This goal reminds me of a remark by Duan Yongping (roughly paraphrased):

He would avoid any company that sets goals like "becoming a Fortune 500 company" or "achieving XXX revenue."

Because a company’s goal should not be numbers but serving customers and end consumers. "Becoming a Fortune 500 company" or "achieving XXX revenue" are outcomes that naturally follow from serving customers and consumers. Achieve them if possible, but it’s fine if not. Any company that does not prioritize serving customers and consumers is, in his view, undisciplined.

I strongly agree with this perspective.

As for that Ethereum treasury company, I can’t determine whether its goal qualifies as serving customers, but it just sounds off to me.

To achieve this goal, the company has been making bold moves recently. For example, its next step is to issue shares, with the planned fundraising amount exceeding several times its current market capitalization.

If it were merely issuing shares to raise funds for buying Ethereum, the risk would still be manageable. But I worry that under the激励 (motivation) of such an "exciting" slogan, it might get carried away, further pursue scale, and take on debt—constantly increasing leverage.

And when it is crushed by debt and forced to dump its holdings to repay obligations, it would spell disaster for the entire crypto ecosystem.