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Bitmine Immersion Technologies (NYSE: BMNR) is a digital asset treasury (DAT) company led by chairman Tom Lee, and it’s been buying Ethereum (CRYPTO: ETH) weekly for 14 months. On Aug. 17 alone, it bought 9,926 ETH worth around $19 million, only to buy another 32,447 ETH just six days later. The coin’s price is up by 28% in the 30 days ending on Aug. 27 alone, a stunning reversal after months of weakness.
But does any of this mean investors should load up on Ethereum like Tom Lee is?
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Bitmine is playing a different game than individual investors
As a digital asset treasurer, Bitmine is designed to buy and hold as much of one crypto asset as it can get its hands on. In this case, that asset is Ethereum.
The business model is to issue new shares of its stock, use that capital to buy more coins, and then rinse and repeat. As long as the stock trades above the value of the coins backing each share — which is a very big and not at all safe assumption to make — each new share sold buys more Ethereum than it dilutes, so that the cycle can continue.
So far, though, the company is deep in the red on its hoard, having paid $19.1 billion for Ethereum that was worth $10.9 billion as of May 31. Bitmine has also repurchased 20.8 million of its own shares since July, which helps to balance the issuance side of the equation.
It goes without saying that individual investors cannot run their own portfolios using any set of methods that approximate this, which also means that your incentives and approach to buying Ethereum or any other coin have to be far more measured.
Put differently, Tom Lee can keep accumulating Ethereum because he can sell new stock to fund it, and how much he raises depends on what investors will pay for those shares. And given that Bitmine now controls nearly 5% of the coin’s supply, he can also count on the portion he controls not being sold to depress prices.
Should you invest too?
It’s worth knowing Lee’s thesis for owning Ethereum so you can decide whether it’s an asset you’d want to hold (or hold more of).
Lee believes that Ethereum will benefit significantly from emerging and ongoing trends such as asset tokenization, and he also thinks that staking the coin will be an important source of stable, institutional-grade financial returns. Assuming Ethereum is the site of some of the activities related to those trends — and in both cases, it already is the single biggest venue — it’ll be positioned to capture some of the value being created, either via transaction fees on its network or through other mechanisms that benefit its ecosystem.
