After its stock price plummeted by 80%, is there a mismatch in BitMine's value?

Author: Zhou, ChainCatcher

The crypto market continues its slump. Since November, the price of Ethereum has fallen by nearly 40% from its peak, and ETFs have seen continuous net outflows. In this systemic retreat, BitMine, the largest Ethereum treasury, has become a focus of attention. Peter Thiel's Founders Fund has reduced its holdings in BMNR by half, while Cathie Wood's ARK Invest and JPMorgan Chase have chosen to increase their holdings against the trend.

The polarized attitude of capital has put BitMine's "5% alchemy" on the spot: 3.56 million ETH, 3 billion unrealized losses, and mNAV falling to 0.8. As one of the last bastions of Ethereum buying, how long can BitMine continue to buy? Is there a value mismatch? After the DAT flywheel stalls, who will take over the ETH? I. BitMine's 5% alchemy: How long can the funds sustain it? BitMine, the second-largest cryptocurrency treasury company after MicroStrategy, had planned to purchase tokens equivalent to 5% of the total Ethereum supply in the future. On November 17th, BitMine announced that its Ethereum holdings had reached 3.56 million, accounting for nearly 3% of the circulating supply, more than halfway to its long-term goal of 6 million. In addition, the company currently holds approximately $11.8 billion in crypto assets and cash, including 192 Bitcoins, $607 million in uncollateralized cash, and 13.7 million shares of Eightco Holdings stock. Since launching its large-scale cryptocurrency accumulation plan in July, BitMine has become a focus of the market. During that period, the company's stock price rose in tandem with the price of Ethereum, and the story of "increasing market capitalization through cryptocurrency" was seen by investors as a new model in the crypto space. However, as the market cooled and liquidity tightened, market sentiment began to reverse. The decline in Ethereum's price has made BitMine's aggressive buying pace appear even more risky. Based on an average purchase price of $4,009, BitMine's unrealized losses are approaching $3 billion. Although Chairman Tom Lee has repeatedly expressed bullish views on Ethereum and stated that he will continue to add to his holdings at lower prices, investors' focus has shifted from "how much more can be bought" to "how long can it hold out?" Currently, BitMine's cash reserves are approximately $607 million, primarily funded through two channels. Firstly, there's the revenue from crypto assets. BitMine relies on immersion-cooled Bitcoin mining and consulting services for short-term cash flow, while simultaneously investing in Ethereum staking to pursue long-term returns. The company stated that its ETH holdings will be pledged, generating approximately $400 million in net proceeds. Secondly, there's secondary market financing. The company launched an ATM stock sale program, a mechanism that allows it to sell new shares at any time to obtain cash without pre-setting a price or size. To date, the company has issued hundreds of millions of dollars worth of shares, attracting investment from numerous institutional investors, including well-known institutions such as ARK, JPMorgan Chase, and Fidelity. Tom Lee stated that when institutions buy large amounts of BMNR, these funds will be used to purchase ETH. Through the dual-engine approach of accumulating ETH and generating revenue, BitMine is attempting to reshape the logic of corporate capital allocation, but changes in the market environment are weakening the stability of this model. In terms of stock price, BitMine (BMNR) is facing some pressure, having fallen about 80% from its July high. Its current market capitalization is approximately $9.2 billion, lower than its ETH holdings value of $10.6 billion (based on an ETH price of $3,000). Its mNAV has fallen to 0.86, reflecting market concerns about the company's unrealized losses and the sustainability of its funding.

II. The Last Straw for ETH Price: Three Visible Factors of Widespread Divergence in Purchasing Power and a Decline in Staking

From a macro perspective, the Federal Reserve released hawkish signals, reducing the probability of a December rate cut, leading to overall weakness in the crypto market and a significant decline in risk appetite.

BitMEX co-founder Arthur Hayes recently stated that even though dollar liquidity has contracted since April 9th, ETF inflows and DAT purchases have enabled Bitcoin to rise, but this situation has ended.