BitMine faces $6.6 billion paper loss on Ethereum holdings

BitMine is now staring at a brutal $6.6 billion loss on its Ethereum stash. If the company decides to dump that Ethereum today, it’ll go down as the fifth biggest trading loss ever recorded, sitting just behind disasters like Archegos in 2021.

And yeah, that loss? It’s already 66% the size of Archegos’ full collapse.

This didn’t happen overnight. Ethereum has been falling for months, but last week’s double-digit crash in both Ethereum and Bitcoin pushed BitMine deeper into the red.

The token’s now trading at around $2,300, which is the lowest it’s been since June. BitMine bought most of its pile when prices were between $3,800 and $3,900. Brutal.

BitMine went all-in on Ethereum and bought too high

BitMine wasn’t always this deep in. The company started out as a Bitcoin miner, but in June, it switched things up and decided to become an Ethereum treasury firm.

The plan? Buy up 6 million ETH, or about 5% of the total supply, and stake it to earn yield. It already holds 4.3 million Ethereum, and added 41,788 more tokens just a few days ago.

Tom Lee, BitMine’s chairman, went on CNBC this week and tried to stay calm. “All the pieces are in place for crypto to be bottoming right now,” he said on Squawk Box. Lee still thinks Ethereum has strong fundamentals and sees the $3.6 trillion crypto industry as solid long term. “If that’s the case, crypto prices should follow,” he said. But none of that changes the fact that they’re down over $6 billion on paper.

The company isn’t doing this alone. Big names like Cathie Wood, Peter Thiel’s Founders Fund, Galaxy Digital, and Kraken are backing BitMine. Doesn’t help much when the price tanks though. Ethereum is still down 53% from its August all-time high of $4,946. That’s the hole they’re in.

No leverage saved BitMine, but it didn’t help others

BitMine didn’t borrow money to buy Ethereum. That’s one thing going in their favor. A lot of these crypto treasury firms took on debt when prices were high.

Now they’re underwater, and they might not survive if prices stay low. Coinbase has already warned that some of them could blow up and hurt the rest of the market.

Lee blamed some of this recent drop on what he called a “lack of leverage” since the October 10 crash, plus the chaos in the precious metals market last Friday. He said BitMine sees this dip as a buying chance. Sure. But the numbers are what they are.

They’re not alone in the pressure cooker. Michael Saylor’s Strategy, the biggest Bitcoin treasury company out there, is also watching Bitcoin drop below its average entry price for the first time since 2023. Unlike BitMine, Strategy uses leverage. That means if the price keeps falling, they might be forced to sell some of their Bitcoin.

Saylor, for his part, sounded confident when asked about it on Fox Business. “The company’s engineered to take an 80 to 90% drawdown and keep on ticking,” he said. “I think we’re pretty indestructible.”

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