Bitmine Immersion Technologies: Buying The Ethereum Dip With Corporate Leverage

Summary Bitminer transitioned to an Ethereum treasury company a few months ￰0￱ has captured my attention with the recent announcement that they own 2.7% of ETH ￰1￱ is a speculative venture, with a steep premium between its ETH and market cap, but it also has the backing of some famous investors with deep ￰2￱ is itself a speculative vehicle, and so adding corporate leverage to it, like the 50M shares BMNR created to buy ETH with, ratchets up the risks to ￰3￱ leverage also ratchets up the reward, as we've seen with MSTR and ￰4￱ aims to be the MSTR of Ethereum. Currently, BMNR is sitting on $1B in unrealized losses, although this may be temporary based on where Ethereum goes from ￰5￱ readers of mine will know that I have a fixation on cryptocurrency treasury companies, or firms that hold crypto like Bitcoin ( BTC-USD ), Ethereum ( ETH-USD ), and Solana ( SOL-USD ) on their balance sheets instead of US Dollars.

I've covered a few of these firms, as well as an ETF that holds the convertible bonds issued by these firms, and so little surprises me now when I see charts like today's focus, Bitmine Immersion Technologies, Inc. (BMNR). The market just can't get enough of crypto treasury companies, it seems. Here's the YTD, including the massive spike in July when they made the shift from being solely a Bitcoin mining operation to an Ethereum treasury ￰6￱ by YCharts Other shifts, such as adding famous investor Tom Lee (Fundstrat and the GRNY ETF) as chairman and the news of Peter Thiel ( PYPL and PLTR notoriety, among others) taking a 9% stake in the firm, have also supercharged its ￰7￱ that spike in July died down (condolences to those who bought at the top), the firm has still had significant volatility.

Here's a zoomed-in look since August, essentially excluding the announcements that drove the stock. I'll map ETH against it, too, to show how the firm's price is now tied to its treasury ￰8￱ by YCharts Note that sometimes charts can be ￰9￱ like that, with two different Y-axes, the correlation is visible, but the difference in returns is obscured. Here's the normalized chart so you can see how volatile BMNR is compared to ￰10￱ by YCharts The Anatomy of an ETH Treasury Company One thing to consider is that investors track how much Ethereum BMNR owns and how much it is ￰11￱ dramatically influences their stock price, especially because most of the treasury holdings are bought with debt and stock issuance, providing inherent ￰12￱ BMNR's case, most of their financing has been done through share issuance, heavily diluting the ￰13￱ months ago (pre-treasury announcement), there were fewer than 2M shares, and now there are over ￰14￱ by YCharts For the record, this kind of jump is not ￰15￱ fact, most large corporations do the opposite and buy back shares from the ￰16￱ idea here is not to dilute shareholders out of their value, although that is what happens when new shares are issued en masse, but to generate enough cash to build an Ethereum position worth investing in after the ￰17￱ dynamic creates a situation where the company is valued partially on its ETH holdings and partially on its ability to continue amassing ￰18￱ wider this divergence, the more risk there is to ￰19￱ of Oct. 21st (time of writing), the BMNR's treasury was worth $12.4B and its market cap was $16.5B.

Here is the last month of fluctuations between the two figures: Moonfarm The timing of the buys from BMNR is important too because investors are relying on the corporate operations to provide ￰20￱ is one way they can easily and cheaply raise BMNR's value, getting good deals on ETH ￰21￱ can track these purchases, going back the last three months since the announcement, to see how BMNR is doing. It's also helpful to see when their USD holdings ￰22￱ they get too low, expect more share dilution or debt ￰23￱ ETH's price has been falling in the last few days, and so BMNR is currently underwater on their ETH ￰24￱ may be temporary, and your view of that will depend on your opinions on ￰25￱ the price recovers, these unrealized losses will turn to unrealized gains and boost BMNR's stock ￰26￱ Controlling Ethereum Because cryptocurrency networks are democratic machines with your votes tied to your assets, it is in the best interest of whales to stay that way and to accumulate more and more of the network so that they have an outsized ￰27￱ this end, BMNR has been keeping tabs on how much of the ETH supply they own, which is now at 2.7% of currently issued ￰28￱ goal is 5% of supply, which they call the "Alchemy of 5%" (0:3:18).

With this power, treasury corps will increasingly have more and more say about what happens with the ￰29￱ believes that they are really a "crypto infrastructure company," and their building out of validators for the ETH network is proof of ￰30￱ will also help them build a larger stake in ETH, as they will earn rewards for participating in the network. I can't say for certain if this strategy will bear fruit, mostly because it depends on the price of Ethereum, which is a very speculative ￰31￱ is more and more true the shorter the timeframe you have, and so it stands to reason that investors should be very concerned with the risks of this plan panning ￰32￱ Ultimately, I am skeptical of folks calling BMNR the "Strategy ( MSTR ) of Ethereum," but I get the comparison on some ￰33￱ firms have risen to the top of their respective cryptocurrencies in terms of how much they hold and have become whales in the ￰34￱ firm is very risky, and investors could easily lose their shirt on it if they buy in at the wrong time—valuation-wise, at least; see the 3000% spike and then 75% crash.

I split the jump and crash into two charts to make this point: Data by YCharts Data by YCharts Investors going into this stock moving forward need to understand that this is an aggressive position, even more so than holding cryptocurrency ￰35￱ isn't always a bad thing, as shown in BMNR's outperformance of ETH itself, just like how MSTR has outperformed ￰36￱ corporate leverage adds risk, but also ￰37￱ reward hinges on something that BMNR has little control of: the price of ￰38￱ are a lot of considerations, and the most important from my view is position ￰39￱ wanting to hold this firm should deeply consider their sizing and its impact on their portfolio if ETH were to experience one of its infamous nose-dive ￰40￱ who believe ETH will outperform BTC moving forward will likely prefer BMNR to MSTR for the same ￰41￱ for reading.