After a week of double-digit losses for Bitcoin and Ethereum, the crypto market sell-off may be running out of steam.
This is according to Tom Lee, president of Ethereum treasury company Bitmine Immersion Technologies, who made the point in an interview on CNBC» Squawk Box on Monday as paper losses on his company’s Ethereum reserve reached a staggering $6.6 billion.
“All the pieces are in place for crypto to bottom out right now,” Lee said, adding that he believes the fundamentals of the $3.6 trillion industry are still strong, pointing to growing activity on the Ethereum network.
“If this is the case, cryptocurrency prices should follow,” Lee said.
Bitmine, formerly a Bitcoin mining company, turned its attention to buying Ethereum in June. Its stated goal is to acquire 5% of the entire supply of Ethereum tokens – around 6 million – and stake them to earn yield.
The company has large institutional investors including Ark Invest CEO Cathie Wood, Peter Thiel’s Founders Fund, crypto exchange Kraken, and Galaxy Digital, among others.
However, Bitmine finds itself in a difficult situation. Much of the 4.3 million Ethereum the company owns was purchased at an average price of $3,800 to $3,900 per token.
The second-largest cryptocurrency has fallen 53% from its all-time high of $4,946 reached in August.
The asset is now trading at around $2,300, its lowest price since June.
This decline puts Bitmine’s Ethereum business in contention for the five biggest financial losses on record – should the company sell.
Digital asset treasury companies like Bitmine have grown in popularity over the past year.
Yet as cryptocurrency prices fall, many of these companies are facing large paper losses after buying Bitcoin, Ethereum and other assets near their all-time highs.
Crypto exchange Coinbase has previously warned that these companies – particularly those taking on debt to buy crypto – could pose a systemic risk to the crypto industry.
In a February 2 investor update, Lee said Bitmine had acquired an additional 41,788 Ethereum tokens and blamed the weakness in the crypto market on a lack of leverage following the October 10 stock market crash and Friday’s precious metals market plunge.
He reiterated that Bitmine views the pullback as an attractive buying opportunity given Ethereum’s strengthening fundamentals.
These strengthening fundamentals are, however, debated.
Crypto security experts have previously stated DL News that Ethereum’s increased network activity can primarily be attributed to a type of crypto scam that has become cheaper to pull off since the network’s last upgrade in December.
Bitmine is not the only crypto treasury company feeling the pressure.
