Bitmine Immersion Technologies, the digital asset treasury led by chairman Tom Lee, keeps adding Ethereum to its balance sheet even though the position remains underwater on a cost basis. The company bought 9,926 ETH on Aug. 17 and another 32,447 ETH six days later, betting on a share-issuance model that only works while its stock trades above the value of its coin holdings.
Bitmine has been buying Ethereum weekly for 14 months. On Aug. 17, it purchased 9,926 ETH worth around $19 million, then added another 32,447 ETH just six days later.
A different game than individual investors
As a digital asset treasury, Bitmine's business model is to issue new shares, use the proceeds to buy more Ethereum, and repeat. The cycle depends on the stock trading above the value of the coins backing each share — according to The Motley Fool, that is "not at all safe" to assume.
So far, the bet has not paid off. Bitmine paid $19.1 billion for Ethereum that was worth $10.9 billion as of May 31. It has also repurchased 20.8 million of its own shares since July, which helps offset the dilution from issuing new stock.
Bitmine now controls nearly 5% of Ethereum's supply, and Lee can count on that portion not being sold to depress prices. Ethereum's price rose 28% in the 30 days ending Aug. 27, a reversal after months of weakness.
Lee's case for Ethereum
Lee believes Ethereum will benefit from trends such as asset tokenization and from staking the coin as a source of institutional-grade returns. The network is already the largest venue for both activities, positioning it to capture some of the value created through transaction fees or other mechanisms.
There is preliminary evidence supporting that thesis, but Lee's past price predictions for Ethereum have not been very accurate. Individual investors cannot replicate Bitmine's share-issuance model, so anyone weighing the same bet needs a more measured approach and, per the source, a long-term, patient perspective.
Source: The Motley Fool
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