Ethereum treasury company BTCS has been selling ETH below its original purchase price as part of an effort to manage a large decentralized finance borrowing position on Aave.
The Nasdaq-listed company reported approximately $64.1 million in Aave debt as of November 9, backed by 46,676 ETH worth about $99.3 million at the time.
That left BTCS with a meaningful collateral buffer, but falling Ethereum prices have narrowed the distance between the company’s position and the level at which Aave could begin liquidating collateral.
BTCS said the ETH sales were voluntary risk-management transactions rather than forced liquidations.
BTCS used 46,676 ETH to secure Aave borrowing
According to the company’s November 12 quarterly filing, BTCS had 46,676 ETH pledged as collateral on Aave as of November 9.
At an ETH price of roughly $2,127, those coins were worth approximately $99.3 million.
The borrowing position, including accrued interest, stood at about $64.1 million.
That means the collateral was worth roughly 155% of the outstanding debt at the reported price.
BTCS says it actively manages liquidation risk
The company said it monitors its decentralized finance borrowing positions and adjusts them when necessary.
That can involve adding more collateral or repaying part of the outstanding debt.
BTCS has also sold ETH as part of this strategy.
The objective is to keep its position sufficiently above Aave’s liquidation threshold as market conditions change.
ETH was sold below the company’s cost basis
BTCS acknowledged that some Ethereum sales were completed below the original acquisition price.
The company said the sales formed part of its collateral-management strategy.
That means BTCS accepted realized losses in exchange for reducing the risk that a further ETH decline would trigger forced liquidations.
The filing does not isolate the exact ETH sold for Aave protection
The company did not disclose how many ETH were sold specifically to protect the Aave position.
It also did not state exactly how much of its reported realized losses came from those sales.
That makes it difficult to calculate the precise cost of the collateral-management strategy from the filing alone.
BTCS recorded $30.6 million in realized digital asset losses
During the first nine months of 2026, BTCS recorded approximately $30.6 million in realized losses on digital asset transactions.
The losses came from two main areas.
One was ETH sales associated with managing borrowing positions.
The other involved accounting losses recognized when ETH was transferred into liquidity pools.
The company did not provide a separate figure for each category.
Nine-month net loss reached $49.5 million
BTCS reported a net loss of approximately $49.5 million for the first nine months of 2026.
That compares with a $52.2 million profit during the same period a year earlier.
The swing reflects the volatility created by a balance sheet heavily exposed to Ethereum and crypto-linked financing.
BTCS says no liquidation has occurred
Despite the pressure, the company said it had not experienced any full or partial liquidation events involving its DeFi borrowing positions through November 11.
That distinction is important.
BTCS sold ETH voluntarily.
Aave did not automatically seize collateral from the company.
The transactions were intended to reduce risk before the protocol’s liquidation mechanism became relevant.
How Aave liquidations work
Aave uses a metric known as the health factor.
The health factor compares the risk-adjusted value of a borrower’s collateral with the value of the outstanding debt.
A health factor above 1 means the position is not eligible for liquidation.
If it falls below 1, liquidators can repay part or all of the borrower’s debt and receive collateral in return.
BTCS estimated health factor was around 1.24
BTCS said Aave’s liquidation threshold for ETH collateral is generally 80%.
Using the company’s November 9 figures produces an estimated health factor of approximately 1.24.
That indicates BTCS still had a buffer at the time.
But the buffer becomes smaller as ETH falls or as borrowing costs increase.
Estimated liquidation price sits near $1,717
Applying the reported figures and the 80% liquidation threshold produces an estimated liquidation price near $1,717 per ETH.
The estimate assumes that:
- The debt balance remains unchanged
- The amount of ETH collateral remains unchanged
- Aave’s liquidation parameters remain unchanged
Any changes to those variables would move the liquidation level.
Ethereum traded near $1,932 on November 13
Ethereum was trading around $1,932 at the time of reporting.
That placed ETH approximately 11% above the estimated liquidation level.
The gap is not extremely large for an asset as volatile as Ethereum.
That helps explain why BTCS has been actively managing the position before the health factor reaches a critical level.
A further ETH decline could increase pressure quickly
If Ethereum falls, the dollar value of BTCS’s collateral declines.
The debt, however, is largely denominated in dollar-linked stablecoins.
That creates an asymmetric risk.
The collateral can lose value rapidly while the dollar value of the debt remains relatively stable.
Adding collateral is one defense
BTCS can protect the position by depositing more ETH into Aave.
That increases the value supporting the outstanding loan.
The trade-off is that more of the company’s treasury becomes locked inside the borrowing arrangement.
Those assets then become less available for other corporate purposes.
Repaying debt is another defense
The company can also reduce liquidation risk by repaying stablecoins.
That lowers the amount owed.
Repayment can be funded through:
- ETH sales
- Stablecoin reserves
- New financing
- Other liquid assets
Selling ETH at a loss may therefore still make sense if it materially reduces the chance of forced liquidation.
Forced liquidation could be more expensive
A voluntary sale gives management more control over timing and execution.
A protocol liquidation occurs automatically once the health factor falls below the required level.
Liquidators receive collateral according to Aave’s rules and may also receive a liquidation incentive.
That can make forced liquidation more expensive than proactively reducing the loan.
BTCS has borrowed heavily through Aave
Between January 1, 2025, and November 11, 2026, BTCS borrowed approximately $152.4 million in stablecoins through Aave.
It repaid about $89.4 million during the same period.
That left the company with the current debt position of roughly $64.1 million, including accrued interest.
Borrowings mainly involved USDT and GHO
The company’s DeFi debt primarily consists of Tether’s USDT and Aave’s GHO stablecoin.
Both are designed to maintain values near the U.S. dollar.
This creates the basic structure of the trade:
BTCS borrows relatively stable dollar-denominated assets.
It pledges volatile ETH as collateral.
If ETH rises, the collateral position strengthens.
If ETH falls, the liquidation risk increases.
Borrowing rates add to the debt over time
As of November 9, BTCS reported variable annual borrowing rates of approximately:
- 6.54% for USDT
- 4.5% for GHO
These rates can change based on Aave market conditions and utilization.
Interest adds to the outstanding debt.
Even if ETH’s price remains unchanged, higher accrued borrowing costs can gradually reduce the health factor.
Variable-rate borrowing adds another source of uncertainty
The company does not know exactly what its future borrowing cost will be.
If demand for stablecoin borrowing rises on Aave, rates can increase.
Higher rates mean BTCS must either pay more interest or reduce its outstanding balance to keep risk under control.
That creates another variable alongside ETH price volatility.
DeFi borrowing supported BTCS’s Ethereum accumulation strategy
BTCS has used decentralized lending alongside more traditional financing to expand its Ethereum exposure.
The company has also used:
- Equity financing
- Convertible debt
- Other capital-market transactions
The broader strategy resembles a leveraged Ethereum treasury model.
Borrowing allows the company to gain additional capital without immediately selling all of its ETH.
BTCS had accumulated nearly 56,000 ETH by July 2025
By July 2025, BTCS had accumulated approximately 55,788 ETH.
The company used a mixture of equity issuance, convertible financing and DeFi borrowing to build the position.
That strategy can produce strong gains when Ethereum rises.
It also creates additional downside risk when ETH falls.
Leveraged treasury strategies amplify market moves
A company holding ETH without debt is exposed primarily to the token’s price.
A company holding ETH while borrowing against it faces additional financial leverage.
When ETH rises, the company can benefit from a larger asset base.
When ETH falls, the decline also weakens the collateral supporting the debt.
That can force capital-management decisions at unfavorable prices.
Selling below cost is the consequence of that leverage
BTCS’s latest ETH sales illustrate this trade-off.
The company may prefer to keep Ethereum for long-term upside.
But protecting the Aave position can require selling some ETH when prices are already weak.
That can turn unrealized losses into realized losses.
BTCS held only $463,000 in cash at September 30
The company’s September 30 balance sheet showed approximately $463,000 in cash and cash equivalents.
That was down from about $1.53 million at the beginning of the year.
On its own, that is a relatively small amount compared with the company’s debt obligations.
However, BTCS also holds substantial digital assets and stablecoins.
Most fair-value digital assets were tied up as collateral
BTCS said a substantial majority of its digital assets measured at fair value were deposited on Aave.
Those assets remain subject to protocol restrictions while the loans are outstanding.
This limits their usefulness for ordinary corporate spending.
A large crypto balance therefore does not necessarily mean the company has the same amount available as unrestricted liquidity.
November liquid resources were much larger
As of November 9, BTCS reported approximately $142.6 million in cash, stablecoins and liquid digital assets.
That provides a much broader picture of available resources than the September cash figure alone.
Still, a portion of those assets may serve strategic or collateral purposes.
Total debt reached approximately $82 million
The company reported total debt obligations of around $82 million.
That included:
- $64.1 million in Aave borrowings
- $17.9 million in convertible notes
The DeFi position therefore represents the majority of BTCS’s reported debt.
BTCS had exposure to nearly 60,000 ETH
At September 30, the company reported total exposure to approximately 59,856 ETH.
That included about 49,571 ETH held at fair value.
Another 10,285 ETH were represented through liquidity pool positions.
This means the company’s Ethereum exposure extends beyond the collateral disclosed in the November Aave position.
Liquidity pool positions introduce different risks
ETH placed into liquidity pools can generate fees or other returns.
But those positions can have different accounting and market behavior from simply holding ETH.
Potential risks include:
- Impermanent loss
- Smart-contract risk
- Liquidity conditions
- Token-pair volatility
This helps explain why some realized losses in BTCS’s filing were linked to liquidity pool activity rather than only outright ETH sales.
Aave loans have no fixed maturity
BTCS said its Aave borrowings do not have a fixed maturity date.
The loans can remain outstanding as long as the company maintains sufficient collateral and continues meeting protocol requirements.
That gives the company flexibility.
But it also means the position needs ongoing management.
There is no single maturity date at which the risk disappears.
Open-ended borrowing can become expensive
A loan without a fixed maturity may seem flexible, but interest continues accumulating.
The longer the company keeps the debt outstanding, the more it pays.
If borrowing rates rise, the position can become more costly.
Management has to compare those costs with the expected benefit of maintaining the Ethereum exposure.
Falling ETH creates a double challenge
When ETH falls, BTCS faces two pressures.
First, the value of its treasury declines.
Second, the collateral ratio on the Aave position weakens.
That can force the company to sell assets into a falling market.
This is one of the biggest risks associated with leveraged crypto treasury strategies.
Rising ETH would improve the position quickly
The opposite is also true.
If Ethereum rises sharply, the dollar value of the pledged ETH increases.
That improves the health factor.
It gives BTCS more room to maintain the borrowing position without adding collateral or repaying debt.
The strategy is therefore highly sensitive to ETH’s direction.
The $1,717 level is not fixed
Investors should avoid treating the estimated liquidation price as a permanent number.
It can change if BTCS:
- Adds collateral
- Removes collateral
- Repays debt
- Borrows more
- Accrues interest
- Faces changes in Aave parameters
The company has already said it actively adjusts the position.
Actual Aave health factor matters more
Aave’s health factor is the more direct measure of liquidation risk.
A position can have the same ETH price but a different health factor after a repayment or additional deposit.
Investors following BTCS’s risk should therefore look at the full collateral and debt position rather than only one estimated liquidation price.
BTCS has so far chosen active management over forced liquidation
The company’s disclosure shows management is willing to accept realized losses to protect the borrowing structure.
That can be financially painful.
But it is very different from allowing Aave to liquidate the position automatically.
The company is effectively choosing controlled deleveraging.
Controlled deleveraging can protect remaining ETH
Selling part of the treasury to repay debt reduces total ETH holdings.
But it can protect the remaining position.
If a smaller sale prevents a much larger forced liquidation, management may consider the loss worthwhile.
The correct evaluation depends on the amount sold, the reduction in debt, and the future ETH price.
The strategy resembles leveraged balance-sheet management
BTCS is effectively using Ethereum as both:
- A treasury asset
- Collateral for financing
That creates a feedback loop between the asset and the company’s liabilities.
The stronger ETH performs, the easier the financing becomes.
The weaker ETH performs, the more difficult the balance-sheet management becomes.
What could improve BTCS’s position?
Several developments could reduce pressure.
An Ethereum rebound would raise collateral value.
Repaying more Aave debt would improve the health factor.
Additional equity or convertible financing could provide liquidity without requiring further ETH sales.
Lower Aave interest rates would also slow debt growth.
What could make the situation worse?
The main risk is continued Ethereum weakness.
A decline toward the estimated liquidation region could force additional collateral management.
Higher Aave borrowing rates would also increase debt.
If access to capital markets weakens at the same time, BTCS could have fewer options.
That combination would make ETH sales more likely.
What investors should watch
ETH price:
The most immediate variable affecting collateral value.
Aave debt:
Further repayments would reduce liquidation risk.
Collateral balance:
Additional ETH deposits could improve the health factor.
Health factor:
This is the clearest protocol-level indicator of liquidation risk.
Realized losses:
Future filings may show how much ETH is being sold below cost.
Cash and stablecoins:
Liquid reserves determine how much flexibility the company has without selling ETH.
Final thoughts
BTCS’s latest filing shows the risk that comes with combining a large Ethereum treasury with decentralized borrowing.
The company had approximately $64.1 million in Aave debt backed by 46,676 ETH worth about $99.3 million as of November 9.
Its estimated liquidation level was near $1,717 per ETH under unchanged assumptions.
Rather than waiting for that threshold to be reached, BTCS has been selling ETH below its original cost basis and using proceeds to manage its collateral position.
Those transactions have contributed to $30.6 million in realized digital asset losses during the first nine months of 2026.
The company has not reported a forced liquidation.
That means the current losses reflect active deleveraging rather than protocol-enforced asset seizure.
For investors, the central question is whether Ethereum stabilizes before BTCS needs to reduce leverage further.
If ETH recovers, the collateral position can improve quickly.
If the price continues falling, more debt repayment, more collateral, or additional ETH sales may be required to keep the company safely above Aave’s liquidation threshold.
