From Wall Street 'calculators' to the creator of Ethereum micro-strategy, Tom Lee's Bitmine has held 833,000 Ethereum in less than a month since its establishment, accounting for nearly 1% of the total supply, becoming the world's largest publicly listed Ethereum treasury company.
Bitmine's goal is to match MicroStrategy, holding 5% of the total supply of Ethereum.
How does this Wall Street Ethereum bull view Ethereum, and why does he think Ethereum is currently replicating Bitcoin's pre-surge moment in 2017?
This interview elaborates on these issues in detail, and the following is the dialogue content, compiled by the colloquial blockchain.
Q1: Bitmine currently holds 833,000 Ethereum, accounting for nearly 1% of the total supply, becoming the world's largest publicly listed Ethereum treasury company. How does this achievement feel?
Tom Lee: We are moving very quickly; we announced the establishment of Bitmine on June 30 and completed preparations by July 8. In just 27 days, we acquired this Ethereum at an extremely high speed.
This is very important because MicroStrategy has proven the potential for 30 times returns through its strategy. In August 2020, MicroStrategy's stock price was only $13, while Bitcoin rose from $11,000 to $120,000, and its asset strategy brought another 20 times return, achieving a total of 30 times return.
I believe Ethereum is one of the largest macro trades of the next decade. Therefore, we hope to act quickly, acquiring more Ethereum at $3,500 or lower, before it achieves a leap similar to Bitcoin's over the past five years.
Q2. After Bitmine announced its Ethereum treasury strategy, companies like ConsenSys and SharpInk Gaming quickly followed suit within five days, announcing similar plans. Why did so many Ethereum treasury companies emerge within two weeks? Is it a market trend or coincidence?
Tom Lee: Perhaps great minds think alike. For a long time, there have mainly been Bitcoin asset companies and a few Solana asset companies in the market. SharpInk was the first to announce it would become an Ethereum asset company in May; we are actually latecomers.
Ethereum is an extremely attractive asset strategy. If you are bullish on Ethereum itself, the asset strategy allows you to accumulate more Ethereum, providing advantages over ETFs.
Ethereum's staking and proof-of-stake mechanisms make asset companies infrastructure companies, earning yields through staking and possessing true commercial entity attributes. For example, the more than $3 billion worth of Ethereum we hold can earn over 3% through native staking, meeting GAAP net income standards.
Additionally, we pursue scarcity. Bitmine's goal is to acquire 5% of Ethereum, relying on a clean balance sheet and extremely high liquidity advantages—with a daily trading volume of $1.6 billion, ranking 42nd in the U.S. stock market, comparable to Uber. Our market value is about $4 billion, while Uber is $184 billion.
Q3. Bitmine has held 830,000 Ethereum in four weeks, aiming to hold 5% of the total supply of Ethereum, which requires about $20 billion. How do you plan to achieve this goal?
Tom Lee: MicroStrategy currently holds 3.2% of the circulating supply of Bitcoin, with a target of holding at least 1 million Bitcoin, about 5%, to acquire a 'sovereign call option' on the Bitcoin ecosystem. If the U.S. wants to establish a strategic Bitcoin reserve, publicly purchasing 1 million Bitcoin would raise prices due to reduced sellers, potentially skyrocketing to $1 million in an instant; MicroStrategy is a simpler way.
MicroStrategy took five years to reach 3%, averaging about 16 cents a day in Bitcoin purchases. Bitmine, since its establishment, has been adding about 80 cents to $1 of Ethereum per day, at a speed 12 times that. If this speed is maintained, we may reach 5% in 1 to 2 years.
We are a fully compliant entity, 100% adhering to the philosophy of Ethereum as a legitimate and compliant blockchain. All of Bitmine's operations are within the U.S., meeting Wall Street and U.S. government expectations for large-scale staking Ethereum entities.
Ethereum will be the main blockchain for Wall Street's financialization. Someone on Twitter likened staking Ethereum to gamers buying Nvidia. When Wall Street tokenizes assets, it not only needs to hold Ethereum but also hopes that stakers will drive Ethereum's goals. We have played an important role through staking.
Q4. Can the Ethereum Treasury company also have a strategy similar to MicroStrategy's Bitcoin 'sovereign call option'? As JPMorgan and other banks push for dollar on-chain legislation and stablecoins, will the U.S. government contact Bitmine for over-the-counter purchases of Ethereum?
Tom Lee: Your point makes a lot of sense, but our goal is not to hold call options. Looking ahead, Wall Street hopes to migrate the financial system to blockchain, and Ethereum is the largest and most compliant blockchain.
Ethereum is legally recognized under U.S. law and can also be used by other countries and institutions. The U.S. clearly wants to solidify its dominance over Ethereum.
Besides financialization, Ethereum is also related to artificial intelligence. Tokenized robots or other assets require a secure blockchain, and technology and Wall Street are converging on Ethereum.
Goldman Sachs and JPMorgan do not want Ethereum scattered across millions of wallets; they are not pursuing centralization but rather want to stake in a compliant manner. Bitmine has maintained a clean balance sheet from the start, without a complex capital structure, and operates transparently.
We have not yet announced the staking solution because the $3 billion worth of Ethereum needs to be handled cautiously, but we will fully comply with GAAP and U.S. staking requirements, taking a well-considered approach.
Ethereum asset companies are critical infrastructures, not just asset strategies. They offer staking yields and other potential income sources, far exceeding the alternative role of ETH ETFs and are crucial within the ecosystem.
Q5. Bitmine purchased $3 billion worth of Ethereum in a month; why has the price still not broken through $4,000? Why has the market not risen because of this significant purchase?
Tom Lee: As one of the largest buyers of Ethereum, we have learned a lot, but it is not advisable to disclose too many details. In the short term, price movements do not fully reflect fair value. Last week, Ethereum fell to $3,300, possibly due to liquidation levels, paired trading, or someone thinking Ethereum is a 'dead chain,' betting on other chains and attempting forced liquidations.
This is a short-term dynamic, similar to Bitcoin's situation when it was at $1,000 in 2017. Ethereum is experiencing a moment similar to Bitcoin's in 2017, and Wall Street is beginning to support Ethereum.
At the beginning of 2017, Bitcoin was only $1,000; it only skyrocketed in August. Currently, Wall Street's interest in Ethereum assets and networks is unprecedented in the past four or five years.
Q6. Why choose Ethereum Treasury Company instead of Bitcoin asset companies like MicroStrategy or Solana asset companies? What unique advantages does the Ethereum Treasury strategy have?
Tom Lee: I am very optimistic about Bitcoin; research shows its price could reach $1.5 million. However, Bitcoin and Ethereum play different roles in financialization. Ethereum represents blockchain financialization, whereas that is not Bitcoin's goal.
Ethereum also provides a digital native way in the field of artificial intelligence, connecting the real world with digital security, thus attracting companies holding Ethereum assets.
If I were to invest in Bitcoin, I would choose MicroStrategy because it continuously increases its Bitcoin holdings, outperforming Bitcoin itself. The Ethereum asset company is the only way for U.S. stock market investors to access Ethereum, unless they directly purchase Ethereum or ETFs.
For institutional investors, this is a major investment theme. They will not simply invest in JPMorgan but will seek direct exposure to Ethereum; however, ETFs may not be within their fund parameters. Therefore, Ethereum asset companies serve as the macro trading entry for professional investors in the U.S. stock market.
This explains why Cathie Wood and Bill Miller made significant investments in Bitmine; they believe it is the best way to gain macro exposure to Ethereum.
Q7. What tools does Ethereum's DeFi ecosystem provide Bitmine to accumulate more Ethereum? Besides MNAV premium, what other strategies are there?
Tom Lee: That's a good question, but some strategies are proprietary information, so I won't disclose them for now.
Investors should not overly simplify their understanding of asset companies. We are already the third-largest crypto asset company in the world, following Mara Blockchain and MicroStrategy, holding more assets than MetaPlanet.
For companies of our size and liquidity, the strategy is not singular but operates multidimensionally.
Q8. Why would the Ethereum Treasury company have an MNAV premium? Why do investors believe the premium should be close to 1 or below 1 in a bear market?
Tom Lee: Suppose someone acquires Bitmine; our cost structure is strict. Holding $3 billion worth of Ethereum, some may think we are like an ETF, valued only at 1 times net asset value. However, we have a 3% native staking yield, which, if paid as net income, would be equivalent to a 6 times net asset value at a 20 times P/E ratio in the money market, leading to a valuation of 1.6 times.
Additionally, speed must be considered; when the Ethereum strategy was launched on July 8, each share held $4 worth of Ethereum, which increased to $23 by July 27, and is higher now. In 20 days, each share added $19 worth of Ethereum; that’s speed.
MicroStrategy increases Bitcoin by 16 cents a day, gaining a 0.7 premium. Our speed is 12 times that, and the theoretical premium could reach 6 or higher.
Moreover, liquidity premium cannot be ignored. MicroStrategy has a daily trading volume of $3 billion, and we are the second-largest liquid crypto asset company at $1.6 billion, while MetaPlanet only has $50 million.
Therefore, Bitmine's valuation should be 1 times net asset value, plus a 6 times earnings premium, along with speed and liquidity premiums.
Q9. Bitmine's speed of acquiring Ethereum in the first month is 12 times that of MicroStrategy; can this speed be maintained over the next year? How do you achieve such a high purchase speed?
Tom Lee: Speed depends on liquidity, and liquidity and speed complement each other. We can maintain a high speed due to our extremely high liquidity.
As of 2 PM on August 6, our trading volume reached $800 million, while MicroStrategy's was $3 billion. The third-largest holder of Ethereum, Ether Machine, had a trading volume of only $7 million; we are 100 times that; the fourth-largest holder, BTBT, had $49 million. The liquidity difference is huge, directly impacting speed.
High speed requires extremely high liquidity support.
Q10. Where does Bitmine's liquidity come from? How do you attract such high trading volumes to support Ethereum acquisitions?
Tom Lee: Liquidity comes from team collaboration. As chairman, the private equity lead investor is the well-known macro hedge fund Mosaics, attracting support from top investors like Founders Fund, Stan Druckenmiller, ARK Invest, and Bill Miller.
We have blue-chip endorsements from traditional markets and venture capital, and investors trust our vision. I have long advocated for cryptocurrency, promoting Bitcoin's attention in Wall Street in 2017, making it an institutional product, with holdings continuously increasing.
Ethereum is experiencing its '2017 moment'; this makes sense to those who understand us and supports the goals of Ethereum asset companies. I support companies like SharpLink and Andrew Keys; together we are securing the blockchain in the U.S. through staking Ethereum.
Q11. In 2017, you promoted Bitcoin as 'digital gold' on media like CNBC. Is Ethereum now in a similar phase? What similarities do you see between Ethereum's '2017 moment' and Bitcoin's?
Tom Lee: In 2017, Fundstrat focused on macro and thematic research, discovering that millennials would become the driving force of the U.S. economy. We collaborated with Snapchat to publish a white paper exploring advertising for millennials and Generation Z; the research was striking, while many companies still focused on Generation X.
Research on Bitcoin found that its price rose from $100 (during the JPMorgan era) to $1,000 in 2014, with a market cap reaching $100 billion, which was shocking. Fundstrat's research over several months confirmed that 97% of the price increase came from an increase in the number of wallets and activities, reflecting the network value effect.
We predict that if more people use Bitcoin, its price will rise exponentially, potentially reaching $25,000 by 2022, capturing 5-10% of gold's value, possibly reaching $100,000, thus promoting the 'digital gold' narrative. Institutional holdings of Bitcoin are almost zero; it's all retail investors. Bitcoin becomes digital gold and a store of value, with millennials holding Bitcoin like the baby boom generation held gold.
The webinars caused us to lose institutional clients; they thought recommending 'drug dealer and dark web' assets was crazy, damaging our reputation. But Bitcoin is now at $120,000, up 120 times, with 1-2% of investing clients fully in Bitcoin, becoming 'DeGen.'
Ethereum is currently similar to Bitcoin in 2017; it was previously seen as a stagnant chain, with people pursuing faster networks or new validation methods. However, Ethereum has had no downtime for ten years, which Wall Street values. Recently, Circle's IPO has been strong, and stocks for Coinbase and Robinhood have performed excellently.
Q12. Circle, Coinbase, and Robinhood are all building Layer 2s on Ethereum; the tokenization craze is sweeping through. Does Wall Street recognize Ethereum as the core of these trends? Is this why you are optimistic about Ethereum treasury companies?
Tom Lee: Your description makes complete sense. But Wall Street only makes connections when money is being made. For example, many listeners have held Apple, Amazon, or Nvidia for a long time. Nvidia is a stock that grows exponentially, but sometimes it remains stagnant for a year or even several years, then suddenly makes a leap, and the market realizes it needs to be repriced.
Ethereum is currently in a similar phase, with on-chain activity surging to historical highs, the community is invigorated, and prices are recovering, with more people using Ethereum. The benefits of Genius Act for smart contract blockchains are comparable to Bitcoin, but Bitcoin does not support stablecoins.
It is not a bad thing that Ethereum has not reached $15,000. I have seen similar situations; the recommended Tesla and Nvidia have performed steadily in Fundstrat Capital's ETF since 2019, becoming the core of the research portfolio. They do not grow linearly with revenue but move in a stepwise manner.
I hope Ethereum's price stabilizes over the next five years, allowing us to acquire at lower prices. If the price reaches $17,000, acquisition costs will increase, but stock prices will benefit. The current price is advantageous for us.
Q13. In 2017, you predicted Bitcoin would rise from $2,000-$3,000 to $25,000-$40,000, which Wall Street considered crazy but ultimately proved correct. With Ethereum's price now similar, do you think it will repeat Bitcoin's growth path? What are your predictions for Ethereum's price?
Tom Lee: The upside potential of Ethereum is greater than that of Bitcoin due to initial skepticism. In 2017, predicting Bitcoin would reach $100,000 seemed crazy, yet it achieved a 100-fold increase. Ethereum is currently like Bitcoin in 2017; Wall Street is not fully convinced of its survival due to proof of stake and supply issues, but these are being resolved.
Many believe that the Layer 2 story is of no benefit to Layer 1; this perception will break, bringing about a step function growth. The potential of Ethereum could exceed Bitcoin by 100 times; Joe Lubin shares a similar view, and we collaborate to promote Ethereum's digital infrastructure. If Bitcoin reaches $1 million, Ethereum has huge potential due to its financialization and artificial intelligence (the U.S. strategic role).
MicroStrategy's potential is three times that of Bitcoin, while the potential of Ethereum asset companies is three times that of Ethereum. Bitmine is ahead due to unique factors, but all Ethereum asset companies will perform well due to Ethereum being undervalued.
In the short term, Ethereum should reach $4,000. A year ago, the Ethereum to Bitcoin ratio was 0.05; it is stronger today, with prices expected to approach $6,000. By the end of the year, considering purchases from other companies and the rise of Bitcoin, $7,000 to $15,000 seems reasonable. In 2026, with Fed easing and increased liquidity, the price of Ethereum will continue to rise. There is no clear crypto cycle, but if there is, it will be beneficial for us. I hope Ethereum's price remains stable for the next five years before a significant rise.
Q14. Could the Ethereum treasury company form a bubble due to excessive MNAV premium, like investment trust companies in the 1920s? The collapse of GBTC and Three Arrows Capital triggered market turmoil; are you worried that the Ethereum treasury company could cause similar systemic risks?
Tom Lee: In the liquid stock market, this is the most hated V-shaped rebound. Institutional clients believe in Zoom meetings that the stock market should not rise, as valuations are too high. But every time the call ends, this reinforces the argument for the stock market to continue rising; non-consensus views drive the market. The market needs skepticism to rise; if everyone is bullish, that's the top.
Not holding digital asset companies but seeing their rise does not indicate a bubble. A real bubble occurs when everyone is bullish. If listeners are bullish but the market does not rise, that is the bubble. Crypto asset companies only encounter problems due to leverage. Companies using complex financial instruments or debt structures, unless they are scarce and transformative like MicroStrategy or MetaPlanet, may carry risks.
Most crypto asset companies are ordinary; a price decline will not trigger a stock market crash. Crashes are usually triggered by debt or external shocks. We are far from a bubble. If the cost of capital is low, some Bitcoin asset companies have high trading volumes, and the market may even perceive an oversupply, only rising when Bitcoin rises.
There are always calls for bubbles, but a top is when no one is bearish. Now everyone is bearish on Ethereum, Bitcoin, and the stock market. Last week, the five-day bearish engulfing pattern suggested a top; if it were a top, everyone would say 'no problem,' but now everyone is calling it a top, indicating it's far from the top.
