BitMine, once hailed as potentially the digital asset equivalent of Berkshire Hathaway, envisioned itself locking down 5% of Ethereum’s total circulating supply.
Its core strategy was to turn corporate balance sheets into long-term, high-conviction bets on blockchain network infrastructure.
Today, that ambitious vision is colliding with brutal market realities. Ethereum has fallen more than 27% in one month and is trading below $3,000, leaving Bitcoin with more than $4 billion in unrealized losses.
This massive loss is not an isolated event. This reflects a deeper, systemic crisis engulfing the entire digital asset treasury (DAT) sector, which is suffering due to the very volatility it was created to exploit.
ETH accumulation theory addresses existential stress
BitMine currently holds approximately 3.6 million ETH, which is approximately 2.97% of Ethereum’s circulating supply. However, the balance sheet speaks to serious pressures.
The value of the company’s holdings has fallen from a peak of well over $14 billion to just under $10 billion, with paper losses ranging from an estimated $3.7 billion to $4.18 billion, depending on the valuation method.
An independent analysis by 10x Research suggests that the company is effectively losing about $1,000 on every ETH purchase.
For a typical diversified company, such impairments may be manageable. But for pure DAT companies, whose primary and often only purpose is to accumulate and hold cryptocurrencies, the implications are existential.
And it’s not just BitMine. According to data from Capriole Investments, major ETH treasury companies have recorded negative returns of 25% to 48% on their core holdings. Companies such as Sharplink and Ethermachine have seen their holdings fall by up to 80% from their yearly highs.
Throughout the DAT situation, the rapid decline in ETH is rapidly turning corporate balance sheets into debt, putting the sector under a real stress test.
This pressure is forcing a dramatic reversal of corporate intent. FX Nexus (formerly Fundamental Global) has filed for shelf registration to raise $5 billion to acquire Ethereum, aiming to become the world’s largest corporate holder of the cryptocurrency.
However, as prices fell, the company reversed course and sold over 10,900 ETH (approximately $32 million) to fund a share buyback.
This contradiction, where a company was founded to accumulate cryptocurrencies and is now selling them to protect the value of its stock, highlights a fundamental distortion of the DAT model. Rather than being an accumulator of last resort, as the bullish narrative had suggested, DAT is rapidly becoming a forced deleverager.
When the mNAV premium collapses
The viability of a DAT company depends on a key metric: market value to net asset value (mNAV). This ratio compares the company’s stock market valuation to the actual value of its net cryptocurrency holdings.
In a bull market, if 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 premium growth is completely disrupted when the market turns.
According to BitMineTracker, BitMine’s base mNAV is currently 0.75 and its diluted mNAV is 0.90. These numbers indicate that the market is valuing the company at a significant discount to its crypto holdings.
If the premium shrinks or disappears completely, financing becomes nearly impossible. Issuing new shares does not result in meaningful financial expansion and only dilutes existing holders.
Markus Thielen of 10x Research aptly described this situation as a “Hotel California scenario.” As with closed-end funds, when premiums collapse and discounts emerge, buyers disappear, sellers pile up, liquidity evaporates, and existing investors become “trapped in the structure and unable to get out without significant harm.”
Importantly, DAT companies often layer in opaque fee structures that resemble hedge fund-style management fees, further eroding profits, especially during economic downturns.
Unlike exchange-traded funds (ETFs), which maintain strict arbitrage mechanisms to keep stock prices close to their net asset value (NAV), DATs rely solely on sustained market demand to close the discount. If the price falls sharply, that demand disappears.
What remains is an unstable structure like this:
- The value of the underlying asset is declining.
- The stock is trading at a significant discount to its valuation.
- Complex revenue models cannot be justified by performance.
- Existing shareholders will be stuck unless they exit with significant realized losses.
Capriol’s analysis confirms this is a sector-wide issue, showing that most DATs are currently trading below mNAV. The loss of this premium effectively cuts off the primary route to financing growth through equity issuance, thereby disrupting its ability to fulfill its core mission of accumulating cryptocurrencies.
What’s next for DAT?
Bitmine has pushed back on this claim, citing broader liquidity stress, likening the market situation to a “quantitative tightening in cryptocurrencies,” but it is still grappling with structural realities.
Finance companies essentially rely for success on the triple whammy of rising asset prices, rising valuations, and rising insurance premiums. If all three flip at the same time, the model goes into a negative spiral.
The rise of the DAT sector was inspired by MicroStrategy’s success with the debt-financed Bitcoin treasury. However, Capriole’s Charles Edwards clearly states:
“Most financial companies will go bankrupt.”
This difference is important. ETH’s volatility profile is unique, its DAT business model is much more tenuous, and its capital structure is more fragile than MicroStrategy.
Most importantly, they often lack the strong independent operating cash flow needed to withstand long-term market downturns without succumbing to asset sales.
For a DAT model to survive this stress test, three difficult conditions must be met:
- ETH price must rebound strongly and sustainably.
- To resume capital raising, the mNAV ratio must return to a level well above 1.
- Individual and institutional investors need to regain faith in a structure that has wiped out billions of dollars of paper value.
All three states are currently moving in the wrong direction. BitMine may continue to hold large ETH reserves and could reach its 5% supply target if the market stabilizes.
But the company, and the industry as a whole, now serves as a cautious case study.
These highlight the extreme dangers of basing an entire corporate strategy and capital structure on a single, highly volatile digital asset without the structural safeguards, regulatory discipline, and balance sheet diversification needed to weather major market reversals.
The digital asset finance era is at its first true moment of truth, and the resulting multibillion-dollar losses reveal a much weaker business model than its founders anticipated.
(Tag translation) Ethereum
