What Happens When Bitmine Reaches 5% of the ETH Supply?

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Bitmine Immersion Technologies began its life as a Bitcoin mining company but has since pivoted to become the largest Ethereum treasury company in the world, with its own institutional staking service: MAVAN. 

This transformation was spearheaded by Tom Lee, co-founder of Fundstrat Global Advisors. Often compared to what Michael Saylor is to Bitcoin, Lee is the maverick Chairman behind the scenes driving Bitmine's strategy.

Under his leadership, Bitmine has aggressively accumulated Ethereum, rapidly becoming one of the largest digital asset treasury companies (DATCOs) in the world - with 5.81 million ETH tokens worth nearly $11B (at the time of publish). 

You can interact with Bitmine’s entity on Arkham below: (Note: Most of Bitmine’s ETH is staked, and therefore will not appear in its entity)

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The "Alchemy of 5%" and Staking Strategy

At the core of Bitmine’s operation is a long-term target to acquire 5% of the entire circulating supply of ETH. After 14 months of ETH purchases, Bitmine has 4.8% of the total supply (96% towards its stated 5% target).

Unlike Bitcoin treasury companies like Strategy, Bitmine's strategy involves staking most of its ETH (+5M tokens worth $9.8B) to generate yield. 

This approach turns Bitmine from a passive holder into a yield-bearing network participant. In a recent press release, Bitmine’s annualized staking revenues were projected at $257 million, assuming a staking yield of around 2.63%.

What Happens When the Target is Reached?

As Bitmine continues its acquisitions and closes in on its 5% target, securing its position as the largest ETH-holding entity on our top ETH holders list, a question arises as to what happens after Bitmine reaches its target. 

Market observers are currently weighing three potential scenarios:

1. Bitmine continues buying at an unchanged rate: 

It is likely that Bitmine will push past the 5% threshold and continue accumulating at a similar rate. Tom Lee is famously a perma-bull, and he is unlikely to stop here when - from his perspective - ETH is discounted due to it being a crypto bear market. 

2. Bitmine slows its buying: 

A very likely outcome is that Bitmine will begin to taper its purchases. In fact, on-chain data shows that the pace of their acquisitions has already slowed this year. As they cross the 5% mark, Bitmine may begin focusing on managing its balance sheet, other assets, and maximizing the yield from its institutional staking operations rather than funnelling all its cash towards ETH purchases.

3. Bitmine stops buying entirely: 

While it seems unlikely, there is a possibility that Bitmine halts its ETH purchases entirely once the target is reached. If the market's largest corporate Ethereum buyer suddenly exits the demand side, it could temporarily dampen short-term bullish sentiment. However, even without new acquisitions, Bitmine's staking footprint could mean its treasury would continue to grow passively through network rewards.