After the stock price has dropped by 80%, is there a value mismatch for BitMine?

Author: Zhou, ChainCatcher

The cryptocurrency market continues to be sluggish. Since November, the price of Ethereum has dropped nearly 40% from its peak, and ETFs have seen continuous net outflows. In this round of systemic retreat, BitMine, the largest Ethereum treasury company, has become a focal point, with Peter Thiel's Founders Fund reducing its holdings of BMNR by half. Meanwhile, Cathie Wood's ARK Invest and JPMorgan have chosen to increase their positions against the trend.

The capital's torn attitude has put BitMine's "5% alchemy" on trial: 3.56 million ETH, a floating loss of $3 billion, and mNAV dropping to 0.8. As one of the last bastions of Ethereum buying power, how much longer can BitMine continue to buy? Is there a value mismatch? After the DAT flywheel stalled, who will take over ETH?

1. BitMine's 5% Alchemy: How Long Can the Funds Last?

As the second-largest cryptocurrency treasury company after MicroStrategy, BitMine had planned to purchase tokens equivalent to 5% of Ethereum's total supply in the future. On November 17, BitMine announced that its Ethereum holdings had reached 3.56 million ETH, accounting for nearly 3% of the circulating supply, and it has surpassed half of its long-term target of 6 million ETH. Additionally, 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.

Since launching its large-scale coin accumulation plan in July, BitMine has become a market focus. During that time, the company's stock price rose in tandem with Ethereum's price, and the story of "increasing market value through coins" 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 drop in Ethereum's price made BitMine's aggressive buying pace appear riskier, with a floating loss of nearly $3 billion calculated at an average purchase price of $4,009. Although Chairman Tom Lee has repeatedly expressed a bullish outlook on Ethereum and stated that he would continue to accumulate at lower levels, investors' focus has shifted from "how much more can we buy" to "how much longer can we hold out."

Currently, BitMine's cash reserves are approximately $607 million, with funding coming from two main channels.

First is the revenue from crypto assets. BitMine relies on immersion cooling Bitcoin mining and consulting services for short-term cash flow while also positioning itself in Ethereum staking for long-term returns. The company stated that its held ETH will be staked to generate approximately $400 million in net income.

Second is secondary market financing. The company has initiated an ATM stock sale plan, which allows it to sell new shares for cash at any time without preset prices or scales. So far, the company has issued hundreds of millions of dollars in stock and attracted funding from several institutions, including well-known firms like ARK, JPMorgan, and Fidelity. Tom Lee stated that when institutions buy BMNR in large quantities, these funds will be used to purchase ETH.

Through the dual drive of accumulating ETH and generating revenue, BitMine attempts 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 under pressure, having fallen about 80% from its July peak, with a current market value of approximately $9.2 billion, below its ETH holding value of $10.6 billion (based on ETH at $3,000), and mNAV dropping to 0.86. This discount reflects market concerns about the company's floating losses and the sustainability of its funds.

2. The Last Straw for ETH Price: Three Visible Purchasing Powers Differentiating and Staking Retreat

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

Currently, ETH has dipped below $3,000, down over 30% from its August peak of $4,900. This round of adjustment has refocused the market on a key question: if the forces supporting the price previously came from treasury companies and institutional accumulation, then after the buying power retreats, who will take over?

Among the visible market forces, the three main purchasing entities—ETFs, treasury companies, and on-chain funds—are showing differentiation in different directions.

First, the inflow trend of Ethereum-related ETFs has clearly slowed down. Currently, the total ETF holdings are approximately 6.3586 million ETH, accounting for 5.25% of the total supply. According to SoSoValue data, as of mid-November, the total net assets of Ethereum spot ETFs were about $18.76 billion, with net outflows this month significantly exceeding inflows, with daily outflows reaching as high as $180 million. Compared to the sustained net inflow phase from July to August, the funding curve has shifted from a steady rise to a volatile decline.

This decline not only weakens the potential buying power but also reflects that market confidence has not fully recovered from the pace of the crash. ETF investors typically represent medium to long-term allocation funds, and their withdrawal indicates a slowdown in traditional financial channels' incremental demand for Ethereum. When ETFs no longer provide upward momentum, they may instead amplify volatility in the short term.

Secondly, digital asset treasury (DAT) companies have also entered a phase of differentiation. Currently, the total strategic reserve of treasury companies for Ethereum is 6.2393 million ETH, accounting for 5.15% of the supply. The pace of accumulation has significantly slowed in recent months, with BitMine almost becoming the only major player still buying in large quantities. In the past week, BitMine increased its holdings by another 67,021 ETH, continuing its strategy of buying on dips; SharpLink has not continued purchasing after acquiring 19,300 ETH on October 18, with an average cost of about $3,609, and is currently also in a floating loss position.

In contrast, some small and medium treasury companies are being forced to contract. ETHZilla sold about 40,000 ETH at the end of October to repurchase stock, attempting to stabilize its stock price by selling part of its ETH to narrow the discount range.

This differentiation indicates that the treasury industry is shifting from widespread expansion to structural adjustment. Leading companies can still maintain buying power through capital and confidence, while small and medium companies are trapped in liquidity constraints and debt repayment pressures. The market's baton has shifted from broad incremental buying to a few remaining "lone warriors" with capital advantages.

On the on-chain level, short-term capital leaders remain whales and high-frequency addresses, but they do not constitute price support. Recently, those who have consistently taken long positions on ETH have faced liquidation, which has somewhat undermined trading confidence. According to Coinglass data, the total open interest in ETH contracts has nearly halved since the August peak, with leveraged funds rapidly contracting, indicating a simultaneous cooling of liquidity and speculative enthusiasm.

Moreover, recently activated Ethereum ICO wallet addresses that have been dormant for over ten years have begun to transfer out. Glassnode data reports that long-term holders (addresses holding for over 155 days) are currently selling approximately 45,000 ETH daily, amounting to about $14 million. This is the highest selling level since 2021, indicating a weakening of current bullish forces.

BitMEX co-founder Arthur Hayes recently stated that even though dollar liquidity has contracted since April 9, the inflows from ETFs and purchases from DAT have allowed Bitcoin to rise, but that state has now ended. The basis is not rich enough to sustain institutional investors' continuous buying of ETFs, and most DATs are trading at a discount to mNAV, leading investors to now avoid these derivative securities.

The same applies to Ethereum, especially as its staking ecosystem is also showing signs of retreat. Beaconchain data shows that the number of active Ethereum validators has decreased by about 10% since July, reaching the lowest level since April 2024. This is the first significant drop since the network transitioned from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) consensus mechanism in September 2022.

The decline is primarily due to two factors:

First, this year's Ethereum price increase has led to an unprecedented high in validators exiting the queue, as staking operators rush to cancel staking to realize profits.

Second, the decline in staking yields and the rise in borrowing costs have made leveraged staking unprofitable. Currently, Ethereum's annualized staking yield is about 2.9% APR, far below the historical high of 8.6% set in May 2023.

In the context of all three main buying paths facing pressure and the retreat of the staking ecosystem, Ethereum's next phase of price support faces structural challenges. While BitMine is still buying, it is nearly fighting alone; if even BitMine, this last pillar, cannot continue to buy, what the market will lose is not just a stock or a wave of funds, but possibly the foundational belief of the entire Ethereum narrative.

3. Is There a Value Mismatch in BitMine?

After discussing the funding chain and the retreat of buying power, a more fundamental question arises: Is BitMine's story really over? The current pricing given by the market clearly does not fully understand its structural differences.

Compared to MicroStrategy's path, BitMine has chosen a completely different approach from the beginning. MicroStrategy heavily relies on convertible bonds and preferred stocks to raise funds in the secondary market, with annual interest burdens of hundreds of millions of dollars, and its profitability depends on Bitcoin's unilateral rise; BitMine, while diluting equity through new stock issuance, has almost no interest-bearing debt, and its held ETH contributes approximately $400-500 million in staking income annually, which is relatively rigid cash flow with far lower correlation to price fluctuations than Strategy's debt costs.

More importantly, this income is not the endpoint. As one of the largest institutional holders of ETH globally, BitMine can fully utilize staked ETH for restaking (earning an additional 1-2%), operating node infrastructure, locking in fixed income through yield tokenization (such as around 3.5% certain returns), or even issuing institutional-grade ETH structured notes, which are operations that MicroStrategy's BTC holdings cannot achieve.

However, currently, BitMine (BMNR) has a market value in the U.S. stock market that is approximately 13% discounted compared to its ETH holding value. Within the entire DAT sector, this discount is not the most exaggerated but is clearly lower than the historical pricing center for similar assets. Bear market sentiment has amplified the visual impact of floating losses, somewhat obscuring the buffer of income and the value of ecological options.

Recent institutional actions seem to have captured this deviation as well. On November 6, ARK Invest increased its holdings by 215,000 shares ($8.06 million); JPMorgan held 1.97 million shares at the end of the third quarter. This is not a blind bottom-fishing but is based on a judgment of the long-term compound growth of the ETH ecosystem. Once the price of Ethereum stabilizes or gently rebounds, the relative stability of income may allow BitMine's mNAV recovery path to be steeper than that of purely leveraged treasuries.

Whether a value mismatch truly exists is already laid out on the table; the remaining question is when the market will be willing to pay for scarcity. The current discount is both a risk and the starting point of divergence. As Tom Lee said, the pain is short-term and will not change the super cycle of ETH. Of course, it may also not change BitMine's core role in this cycle.

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