Wall Street veteran Tom Lee’s ambitious $1.3 billion bet on the ETH Treasury is under severe pressure as whales and institutional investors begin to exit the world’s second-largest crypto asset due to the recent market downturn in Ethereum prices.
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Ethereum price decline and Bitcoin losses increase
Ethereum fell more than 20% in two days to below $3,300, wiping out more than $1 billion in leveraged positions. This correction has caused ETH to fall approximately 30% from its August high, to its lowest level since mid-July.
According to 10x Research, Lee’s company Bitmine Immersion Technologies Inc., which acquired 3.4 million ETH at an average price of $3,909, is now facing paper losses of more than $1.3 billion.
Backed by billionaire Peter Thiel, Bitmine has adopted a Bitcoin-style corporate finance model, but its funds are now “fully invested and under stress,” leaving little room for defensive action.
Bitmine’s market capitalization to NAV ratio has plummeted from 5.6 in July to 1.2, and the stock price has fallen 70% from its peak, reflecting a rapid revaluation of cryptocurrency valuations.
ETHZilla, another Ethereum holder, has already liquidated $40 million worth of ETH to restore its balance sheet, indicating growing corporate capital participation across the sector.
ETH's price trends to the downside with small profits on the daily chart. Source: ETHUSD on Tradingview
Whale withdraws as liquidation progresses
According to on-chain data from Arkham Intelligence, a large Ethereum whale recently offloaded 5,570 ETH ($19.56 million) to Binance, resulting in a loss of $2.15 million. The move amplified selling pressure amid weak liquidity. ETH’s market cap has now fallen to around $400 billion, with the token down 17% week-on-week.
Technical indicators paint a cautious picture. ETH is below its 50-day moving average ($4,094) and the RSI is near 31, suggesting near oversold conditions, but no reversal has been confirmed. Analysts warn that failure to hold the $3,300 support could lead to a deeper correction towards the $3,000-$2,700 zone.
Demand for institutions will fade, but the basics will remain the same.
After attracting over $9 billion in ETF inflows during the summer rally, Ethereum products saw outflows of $850 million and futures open interest decreased by $16 billion. Retailer enthusiasm has also waned, with Google search interest in Ethereum at just 13% of its annual peak.
Despite the economic downturn, the fundamentals of the Ethereum network remain strong. It continues to process the highest on-chain value of any smart contract platform, and the Layer 2 upgrade proposed by Vitalik Buterin, which aims to reduce rollup withdrawal times to one to two days, could accelerate adoption.
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But for now, Lee’s high-stakes bet on Ethereum is a warning of a collision between over-leveraged optimism and a cooling market, leaving investors wondering whether Bitmine’s multibillion-dollar losses are the beginning or the bottom of Ethereum’s latest cycle.
Cover image from ChatGPT, ETHUSD chart from Tradingview
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