In 18 days, the net assets increased sixfold, the chairman of the US Bitmine talks about the Ethereum "5% alchemy" strategy.

## Aiming for Ethereum Microstrategy

On the 28th, U.S. Bitmain Technologies (hereinafter referred to as Bitmain) released a presentation for investors titled "5% Alchemy" by Chairman Tom Lee. This presentation is the first in the monthly video series "Chairman's Message" and was developed to convey the long-term benefits of cryptocurrency Ethereum (ETH) to investors, as well as to provide the latest information on the company's ETH treasury strategy.

The "5% Alchemy" is an investment strategy by Bitmine that aims to acquire 5% of the total supply of Ethereum. While it mimics MicroStrategy's (now known as Strategy) Bitcoin treasury strategy, its major distinction lies in its specialization in Ethereum.

According to Mr. Lee, the reason why Bitmain chose Ethereum as a treasury strategy asset instead of Bitcoin is that they are confident that Ethereum will become the most important macro trade over the next decade.

The key to this lies in the existence of stablecoins, which are rapidly gaining adoption. Amid the succession of stablecoin issuance plans and discussions by large institutions such as JP Morgan and Amazon, he points out that stablecoins are currently reaching a "ChatGPT-like turning point" in the cryptocurrency space.

Furthermore, the establishment of the GENIUS Act in the United States has become a strong tailwind for stablecoins, with U.S. Treasury Secretary Scott Betseant suggesting that the stablecoin market could grow to a scale of $4 trillion, more than ten times its current size.

Tokenization of real assets, including stablecoins, is being conducted on Ethereum, the largest smart contract platform compliant with U.S. law, boasting an overwhelming market share of over 60%. Therefore, the growth of stablecoins signifies an "explosive increase in demand for Ethereum," Mr. Lee explained.

Strengths of the Treasury Strategy

Mr. Lee argues that Ethereum treasury companies like Bitmine provide value beyond just holding Ethereum or ETFs, and he cited the following four points as the basis for his claim.

• Continuously increase ETH holdings through the issuance of stocks and convertible bonds, improving the amount of ETH held per share.
• Take advantage of ETH's volatility (more than twice that of Bitcoin) to reduce fundraising costs by issuing convertible bonds and other instruments.
• Reinvest staking earnings to realize further ETH purchases
• Strengthen the asset base by acquiring other companies that hold ETH.

In addition, ETH treasury companies are infrastructure businesses, and by staking Ethereum, they can support the security of the Ethereum network based on PoS (Proof of Stake), Mr. Lee points out. Furthermore, since staking generates yields, it becomes a stable source of revenue for the company.

Mr. Lee predicts that in the future, stablecoin issuers and companies that tokenize real assets will stake Ethereum to ensure the health of the network. Ultimately, major financial institutions such as Goldman Sachs and JP Morgan will hold large amounts of Ethereum, emphasizing that "by acquiring 5% of the Ethereum supply, Bitmain will be ahead of the game."

Bitmain's incredible growth

Tom Lee, a former financial strategist at JP Morgan and co-founder of Fundstrat, was appointed chairman of the board at Bitmine on June 30th and led a fundraising effort of $250 million (approximately 37 billion yen) aimed at the large-scale purchase of Ethereum.

The fundraising through private placement was completed on July 8, and just 18 days later, on July 27, Bitmain achieved dramatic growth to become a company with total financial assets of 2.7 billion dollars (approximately 401.2 billion yen).

The breakdown of assets is as follows:

• 600,000 ETH tokens: 2.3 billion USD (approximately 341.8 billion yen)
• Bitcoin: $23 million (approximately 3.4 billion yen)
• Cash: $369 million (approximately ¥54.6 billion)

The total assets have reached 2.7 billion dollars, resulting in a net asset value (NAV) per share of approximately 23 dollars (3,418 yen). This represents a remarkable growth of six times from 4 dollars (594 yen) per share as of July 8, creating a massive shareholder value of 2.4 billion dollars (356.6 billion yen) in just 18 days.

Comparison with Strategy

Mr. Lee specifically demonstrated the astonishing growth speed of Bitmine by comparing it with that of MicroStrategy. He pointed out that "what MicroStrategy achieved in 180 days, Bitmine accomplished in 18 days," and explained the background behind it.

Strategy Inc. has grown through a series of fundraising efforts since the launch of its Bitcoin treasury strategy. Starting with a purchase of $240 million in BTC, it has raised $2.7 billion over a period of 180 days.

On the other hand, Bitmain started with $265 million and achieved a tenfold growth, holding $2.7 billion in assets just 18 days later.

We are aiming for "Ethereum MicroStrategy," but we are moving more quickly.

When comparing stock prices, after starting the Bitcoin treasury strategy in August 2020, the stock price of Strategy Inc. rose from $13 to $480, achieving a 30-fold return. Of that, 11 times was due to the increase in Bitcoin's price, while the remaining 20 times was due to the strategy.

The stock price of Bitmain has shown a trend similar to that of Strategy, surging 9.5 times as the price of Ethereum rose 1.5 times.

Future Outlook

Mr. Lee declared that as part of future prospects, Bitmain aims to build a 100% U.S.-based validator network that is fully compliant with U.S. regulations. He also indicated a policy of actively engaging with the community through collaborations with Ethereum's NFT project Pudgy Penguins and the Ethereum Foundation. Additionally, he stated that selective investments with high expected returns will also be pursued.

However, it was once again emphasized that acquiring 5% of the Ethereum supply, the "5% Alchemy," is the company's primary goal.

Related: How to Buy Ethereum | Investment Benefits, Risks, and Recommended Exchange Selection for Beginners