"We’re Buying Ethereum"... Why Bitcoin Mining Firm’s Stock Soared 3,000% [Business & Issue]

Bitmine Stock Soars After Ethereum Accumulation Announcement
Expectations for Stablecoin Policy Fuel Investor Sentiment
Short-Term Surge Raises Concerns... Risk of Sharp Decline

EPA Yonhap News

Shares of Bitmine, a Bitcoin mining company, have soared more than 30-fold over five trading days after announcing a large-scale acquisition of Ethereum, the world’s second-largest cryptocurrency by market capitalization. This surge is attributed to growing expectations for policy benefits related to stablecoins, particularly in the United States, and heightened anticipation for a rise in Ethereum’s price, which is the most widely used cryptocurrency for stablecoin payments. However, some analysts caution that Bitmine’s stock has risen excessively in a short period, warning of a high risk of a sharp decline and urging investors to exercise caution.

Bitmine Stock Soars 30-Fold in 5 Days... Surge Follows Ethereum Accumulation Announcement

On July 3 (local time), Bitmine’s share price closed at $135, up 130.77% from the previous session. Just five trading days earlier, on June 27, Bitmine’s stock was at $4.26, representing a staggering 3,069% increase in that short span. The stock, which started the year at $7 and had been relatively stagnant, began its meteoric rise after the recent announcement of plans to purchase Ethereum.

To fund its Ethereum acquisition, Bitmine recently issued over 55.55 million new shares, successfully raising a total of $250 million (about 340.8 billion won) from institutional investors. The company also appointed Tom Lee, co-founder of Fundstrat Global Advisors and a well-known expert in the cryptocurrency industry, as chairman of the board.

In an interview with CNBC immediately after his appointment, Chairman Lee emphasized, “Ethereum is the foundation of stablecoins,” and added, “Going forward, the key metric for evaluating Bitmine’s performance will be its Ethereum holdings.”

Expectations for Stablecoin Policy Benefits... Will It Replace Card Payments?

Bitmine’s decision to accumulate large amounts of Ethereum is driven by expectations of benefiting from stablecoin-related policies.

Unlike credit cards, which incur foreign exchange fees and take more than three business days to settle international transactions, stablecoin payments are processed instantly. Due to this convenience, the total volume of stablecoin payments last year reached $27.6 trillion (about 3,772.9 trillion won), which is 7.6% higher than the combined transaction volume of Visa and Mastercard.

Stablecoins are pegged 1:1 to traditional currencies such as the US dollar. When customers purchase stablecoins by paying dollars, the issuing companies acquire underlying assets to maintain the stability of the coin’s price.

According to CNBC, more than 50% of all stablecoins issued worldwide?including the top two by market capitalization, Tether (USDT) and USD Coin (USDC)?are based on Ethereum. Ethereum is considered a suitable underlying asset for stablecoins due to its relatively low price volatility and stable performance compared to Bitcoin.

Currently, there is active movement, particularly in the United States, to institutionalize stablecoins. In the US, the “GENIUS Act,” which would officially recognize stablecoins as a regulated payment method under the supervision of authorities, passed the Senate on June 17. If it passes the House of Representatives in August, stablecoins are expected to become an official means of payment, leading to a significant increase in usage.

Risk of Sharp Decline After Short-Term Surge... Concerns About Repeating Sharplink’s Path

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Some analysts warn that Bitmine’s stock has already surged excessively on expectations for Ethereum investment, increasing the risk of a sharp decline and necessitating caution. They point to the case of Sharplink, a cryptocurrency platform company whose stock also experienced extreme volatility after announcing a large-scale Ethereum purchase, as a precedent to consider.

On May 22, Sharplink announced plans to raise $450 million (about 614.6 billion won) to acquire Ethereum. Following the announcement, its stock price skyrocketed from $3.76 to $79.21, a surge of over 2,000%. However, after the actual Ethereum purchase, concerns over the rapid short-term rise led to a sharp decline, and as of July 3, the stock had dropped more than 84% to $12.66.

CoinDesk, a cryptocurrency-focused media outlet, warned, “Bitmine’s valuation is already reflected in its market capitalization, which has surpassed $800 million (about 1 trillion won),” and added, “Individual investors looking to follow the trend should refer to the Sharplink case and approach with caution.”