After a week of double-digit losses for Bitcoin and Ethereum, the crypto market sell-off may be running out of steam.
That’s according to Tom Lee, chair of Ethereum treasury company Bitmine Immersion Technologies, who made that case in an interview on CNBC’s Squawk Box on Monday as the paper losses on his firm’s Ethereum stash grew to an eye-watering $6.6 billion.
“All the pieces are in place for crypto to be bottoming right now,” Lee said, adding that he believes the $3.6 trillion industry’s fundamentals are still strong, highlighting growing activity on the Ethereum network.
“If that’s the case, crypto prices should follow,” Lee said.
Bitmine, once a Bitcoin mining company, pivoted to buying Ethereum in June. Its stated goal is to acquire 5% of the entire supply of Ethereum tokens — some 6 million — and stake them to earn yield.
The firm has some big institutional investors, including Ark Invest CEO Cathie Wood, Peter Thiel’s Founders Fund, crypto exchange Kraken, and Galaxy Digital, among others.
Yet Bitmine is in a tough spot. Much of the 4.3 million Ethereum the firm owns was bought at an average price of $3,800 to $3,900 per token.
The second-largest crypto has dropped 53% from its $4,946 all-time high achieved in August.
The asset now trades at around $2,300, its lowest price since June.
The decline puts Bitmine’s Ethereum trade in the running for the five biggest financial losses ever — if the firm were to sell.
A lack of leverage
Digital asset treasury firms like Bitmine have soared in popularity over the past year.
Yet as crypto prices fall, many of these firms are facing large paper losses after buying Bitcoin, Ethereum, and other assets close to their all-time highs.
Crypto exchange Coinbase has previously warned that such firms — especially those that took on debt to buy crypto — could pose a systemic risk to the crypto industry.
In a February 2 investor update, Lee said Bitmine had acquired an additional 41,788 Ethereum tokens, and blamed weakness in the crypto market on a lack of leverage following the October 10 market crash and the Friday plunge in the precious metals market.
He reiterated that Bitmine views the pullback as an attractive buying opportunity given Ethereum’s strengthening fundamentals.
Those strengthening fundamentals are debated, however.
Crypto security experts previously told DL News that Ethereum’s increased network activity can mostly be attributed to a type of crypto scam that’s become cheaper to conduct since the network’s last upgrade in December.
Indestructible?
Bitmine isn’t the only crypto treasury firm feeling the pressure.
For the first time since 2023, Bitcoin’s price has fallen below the average buying price of Michael Saylor’s Strategy, the largest Bitcoin treasury company that pioneered the trend.
Unlike Bitmine, Strategy uses leverage to increase the amount of Bitcoin it can buy, which means the company could be forced to sell some of its Bitcoin if the price drops too low.
Saylor has previously addressed these concerns.
“The company’s engineered to take an 80 to 90% draw down and keep on ticking,” he said in an interview on Fox Business in November.
“I think we’re pretty indestructible.”
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
