Risks

This page explains the major risks about adopting this strategy

This document assesses the economic risks of adopting a MicroStrategy-style treasury strategy for Rezerve (RZR), substituting Ethereum (ETH) in place of Bitcoin (BTC). The goal is to identify potential threats to solvency, liquidity, and governance stability, drawing on MicroStrategy’s historical risk profile and relevant Ethereum-specific factors.

(Note that almost risks outlined here are economical risks)

Concentration & Volatility Risks

One of the most fundamental risks is concentration and volatility. Placing a significant portion of the treasury in ETH would mean that RZR’s balance-sheet health becomes directly tied to ETH’s market performance.

In times of market stress, sharp ETH drawdowns could erode reserves, making it harder to meet obligations or honor redemptions without selling into a falling market. This is exactly the scenario MicroStrategy has faced when Bitcoin prices declined, forcing it to endure steep swings in reported equity and market capitalization.

Mitigation Strategy: To prevent this, Rezerve keeps a portion of it's treasury in stablecoins (USD) so as serve as a buffer in case of emergencies.

Financing and Refinancing Risks

Financing and refinancing risks are another critical consideration. MicroStrategy often funded purchases through convertible debt with low or zero coupons, betting that its stock price would stay high enough for conversion to equity.

When market sentiment shifts, this option becomes less viable, and maturities or put dates can force large cash outlays at the worst possible moment. For RZR, any debt-funded ETH acquisition strategy would need careful maturity matching to avoid forced sales.

Mitigation Strategy: To prevent this, Rezerve strategically makes decisions taking into consideration, price action & liquidation prices and constantly monitors all KPIs.

Dilution Risks

This approach also creates dilution risk. If funding comes through equity issuance, existing holders see their share of the treasury diluted. MicroStrategy relied heavily on the market assigning a premium to its shares relative to the book value of BTC holdings.

In a bear market, that premium often vanishes, making capital raises both more dilutive and less effective—an outcome that could equally affect RZR token holders.

Mitigation Strategy: Rezerve dilutes it's holders to acquire more ETH with freshly minted RZR, but then uses the ETH acquired to add liquidity back into RZR ensuring that holders face slight dilution but also get better liquidity to trade RZR with.

Liquidation Risks

Collateralized loans add another layer of fragility. When MicroStrategy took a Bitcoin-backed loan, it became exposed to loan-to-value thresholds that could trigger margin calls. A rapid ETH price drop could similarly force RZR to provide additional collateral or face liquidation, potentially at distressed prices. This risk is magnified if other parts of the reserve are already under stress.

Mitigation Strategy: Rezerve actively monitors all loans and LTVs it has taken out and makes adjustments as necessary to avoid liquidations. Rezerve also diversifies it's positions across multiple accounts.

Liquidity Risks

There is also liquidity and execution risk. While ETH is one of the most liquid cryptocurrencies, large trades—especially in stressed markets—can move prices significantly and increase slippage. MicroStrategy’s experience in Bitcoin markets shows that even deep books can thin rapidly during volatility spikes, complicating both acquisitions and liquidations.

Mitigation Strategy: Rezerve ensures that any liquidity or laons it takes out is done within a reasonable LTV (loan-to-value) limits that give enough room for the price to move.

Conclusion

Adopting a MicroStrategy-style ETH accumulation strategy can amplify RZR’s exposure to ETH price performance and market sentiment. While such a strategy could deliver significant upside in bull markets, it inherently increases treasury volatility, redemption risk, and funding fragility.

Implementing strict allocation limits, diversified reserves, and robust governance over financing decisions is essential for long-term sustainability.