BitMine, once hailed as a potential digital asset equivalent to Berkshire Hathaway, envisioned itself locking up 5% of Ethereum’s entire circulating supply.
His primary strategy was to turn his company’s balance sheet into a long-term, high-conviction bet on blockchain network infrastructure.
Today, this ambitious vision comes up against a brutal market reality. With Ethereum falling more than 27% in a single month and trading below $3,000, BitMine is facing more than $4 billion in unrealized losses.
This mass withdrawal is not an isolated incident; this reflects a deeper systemic crisis engulfing the entire digital asset treasury (DAT) industry, which is collapsing under the very volatility it was created to address.
The ETH accumulation thesis responds to existential stress
BitMine currently holds nearly 3.6 million ETH, representing approximately 2.97% of Ethereum’s circulating supply. However, the results show acute pressure.
The value of his holdings fell from a peak of well over $14 billion to just under $10 billion, translating into paper losses estimated at between $3.7 billion and $4.18 billion, depending on the valuation method.
Independent analysis by 10x Research suggests that the company actually loses around $1,000 for every ETH purchased.
For a standard, diversified company, such a depreciation could be manageable. But for a pure-play DAT company, whose primary and often sole purpose is to accumulate and hold cryptocurrencies, the impact is existential.
And BitMine is not alone. Data from Capriole Investments shows that top ETH treasury companies saw negative returns of between 25% and 48% on their top holdings. Companies like SharpLink and The Ether Machine have seen their holdings fall as much as 80% from their yearly highs.
Across the DAT landscape, ETH’s rapid decline has quickly turned company balance sheets into liabilities, pushing the sector toward a true stress test.
This pressure is forcing a radical reversal of corporate intentions. FX Nexus, formerly Fundamental Global Inc., had filed to raise $5 billion to acquire Ethereum, with the aim of becoming the world’s largest cryptocurrency holding company.
Yet as prices fell, the company reversed course, selling more than 10,900 ETH (around $32 million) to fund share buybacks.
This contradiction, in which companies created to accumulate cryptocurrencies are now selling them to protect their equity value, highlights the fundamental tension of the DAT model. Instead of being accumulators of last resort, as the bullish narrative suggests, DATs are quickly becoming forced means of deleveraging.
When the mNAV premium collapses
The operational viability of a DAT business relies on a crucial metric: the market value to net asset value (mNAV) ratio. This ratio compares the company’s market valuation to the real value of its net holdings in cryptocurrencies.
In a bull market, when a DAT trades at a premium (mNAV > 1), it can issue new shares at a high price, raise capital cheaply, and use the proceeds to acquire additional digital assets. This virtuous cycle of accumulation and bonus-fueled growth completely collapses when the market turns.
According to BitMineTracker, BitMine’s base mNAV now stands at 0.75, and its diluted mNAV stands at 0.90. These figures indicate that the market values the company at a steep discount to the crypto it holds.
When the premium decreases or disappears completely, raising capital becomes almost impossible; Issuing new shares only dilutes existing holders without producing a significant expansion of cash flow.
Markus Thielen of 10x Research rightly called the situation a “Hotel California scenario.” As in a closed-end fund, once the premium collapses and a discount appears, buyers disappear, sellers pile in, and liquidity evaporates, leaving existing investors “trapped in the structure, unable to exit without significant damage.”
Basically, DAT companies operate opaque fee structures that often resemble hedge fund-style management compensation, further eroding returns, especially during economic downturns.
Unlike exchange-traded funds (ETFs), which maintain strict arbitrage mechanisms to keep their stock prices close to their net asset value (NAV), DATs rely solely on sustained market demand to close the discount. When prices fall sharply, this demand disappears.
What remains is a precarious structure where:
- The value of the underlying asset is falling.
- The stock’s valuation is trading at an increasing discount.
- The complex revenue model cannot be justified by performance.
- Existing shareholders are stuck unless they leave the company with significant, realized losses.
Capriole’s analysis confirms that this is an industry-wide problem, showing that most DATs are now trading below mNAV. This loss of premium effectively closes the main channel for financing growth through the issuance of shares, thereby reducing their ability to fulfill their primary mission of crypto accumulation.
What future for DATs?
BitMine, while pushing back against the narrative citing broader liquidity stress, likening market conditions to a “quantitative crunch for crypto,” is still grappling with structural reality.
Treasury companies are fundamentally dependent on a triple whammy to succeed: rising asset prices, rising valuations, and rising bonuses. When all three reverse simultaneously, the pattern enters a negative spiral.
The rise of the DAT sector was inspired by MicroStrategy’s success with a debt-funded Bitcoin treasury. But as Charles Edwards of Capriole clearly states:
“Most treasury companies will go bankrupt. »
The distinction is essential: ETH’s volatility profile is unique, DATs’ business models are much thinner, and their capital structures are more fragile than those of MicroStrategy.
Even more serious, they often lack the strong, independent operating cash flow needed to weather prolonged market downturns without succumbing to asset sales.
For the DAT model to survive this stress test, three difficult conditions must be met:
- ETH prices must make a strong and lasting rebound.
- mNAV ratios must return well above 1 to unlock capital raising again.
- Individual and institutional investors must regain confidence in a structure that has erased billions of paper value.
Currently, all three conditions are moving in the wrong direction. BitMine could continue to hold on to its massive ETH supply and could still reach its 5% supply target if the market stabilizes.
However, the company and the industry as a whole now constitute a cautious case study.
They highlight the extreme dangers of building an entire business strategy and capital structure on a single, highly volatile digital asset without the structural guardrails, regulatory discipline, or balance sheet diversification needed to weather a major market reversal.
The era of digital asset treasury has entered its first true moment of truth, and the resulting billions in losses reveal a business model far more fragile than its creators imagined.
