How Ethereum Treasury Companies are Following the BTC Playbook

“A journey of a thousand miles begins with a single step.” ~ Lao Tzu

Strategy Paves the Way for Crypto Treasury Companies

Did you know that, since its inception, Bitcoin has been the best-performing asset class worldwide?

In fact, at its current $2.27 trillion valuation, Bitcoin has even surpassed silver to become the world’s fifth largest asset class – only behind Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), and gold!

However, until the past few years, bold and daring retail investors enjoyed most of Bitcoin’s meteoric rise while most public companies, outside of crypto exchange giant Coinbase Global (COIN), have cashed in on the move. That is, until Strategy (MSTR) (formerly MicroStrategy) founder Michael Saylor made the bold decision to begin using his software company’s balance sheet to buy Bitcoin. The results speak for themselves: Strategy shares up 2,461% over the past five years, outperforming all individual stocks and trouncing the S&P 500 Index’s 93.1% gains over the same period.  

While it took effort to convince his board, and there were numerous doubters on Wall Street, Saylor’s strategy appears genius in hindsight, and he is now seen as a visionary.

BitMine Immersion Technologies: The Leading Ethereum Treasury Company

While many public firms have followed Strategy’s Bitcoin treasury playbook (albeit with lesser performance), BitMine Immersion Technologies (BMNR) is trying to find success in a new frontier in the crypto treasury realm – Ethereum (ETH). BMNR, which has popular CNBC contributor and Fundstrat Capital managing partner Thomas “Tom” Lee as its chairman, is the leading Ethereum treasury company in the world. BMNR’s website says that the company is “committed to ETH as our primary treasury reserve asset, leveraging native protocol-level activities including staking and decentralized finance mechanisms. As a category-defining digital asset platform, our treasury strategy designed to materially enhance returns for shareholders through strategic accumulation, capital market activities, and participation in Ethereum’s expanding ecosystem. By securing a growing share of ETH supply, we strive to institutionalize capital and real-world assets on-chain, creating long-term value in the digital asset revolution.

The company has been actively increasing its Ethereum holdings, and as of the most recent press release, it holds more than 1.5 million ETH valued at ~6.59 billion, making it the largest corporate ETH holder globally. According to Tom Lee, the company’s goal is to purchase 5% of the ETH supply.

Is Ethereum Having its “Bitcoin 2017” Moment?

In a recent CNBC interview, Tom Lee said that he believes Ethereum is having its “Bitcoin 2017” moment, when Bitcoin went from $1,000 per coin to more than $120,000 per coin. Usually, such a bold prediction would need to be taken with a grain of salt; however, Lee correctly predicted that Bitcoin would 100x in 2017, lending credence to his bold ETH prediction.

Stablecoin Market Growth Will Lead to More ETH Network Activity & Fees

What is a Stablecoin?

When most investors think of cryptocurrencies, they think of rampant speculation and volatility. To most, these attributes are a feature, not a bug. However, a stablecoin is a cryptocurrency that is built to have low volatility and “peg” its value to a stable asset, such as the fiat currency (like the US dollar) or a commodity like silver. Stablecoins operators back their stablecoins by holding fiat currency or T-bills in bank accounts.

What is the Benefit of Stablecoins?

By bringing low volatility to crypto, stablecoins bridge the gap between crypto and legacy finance. The primary benefit of using stablecoins is that they allow for far cheaper and more rapid transactions than traditional banks. In addition, these stablecoins facilitate much easier transactions and shorter wait times.

Why Stablecoin Adoption is Increasing Rapidly

1.      Stablecoin usage decoupled from crypto volatility for the first time in 2024. In other words, stablecoins are being used for wholesale useful functions in running a business.

2.      In the first half of 2024, stablecoins ($8.5T) had more than double the transaction volume of Visa (V). More companies are using stablecoin “rails” than ever before, a trend likely to continue.

GENIUS Act Passes

The GENIUS Act, a piece of legislation that outlines a regulatory framework for stablecoins, was recently passed and should provide even more growth for this hot industry.

Maintaining Dollar Supremacy

Finally, US Treasury Secretary Scott Bessent believes that dollar-backed stablecoins will act as a “new internet-native payment rail” that is fast and frictionless, thereby buttressing the dollar’s status globally. Bessent believes that stablecoins could become one of the largest buyers of US Treasuries, reinforcing the dollar’s strength.

How Does Stablecoin Growth Benefit Ethereum?

Most stablecoins, including the two largest by market cap, Tether (USDT) and USD Coin (USDC), are primarily issued on the Ethereum blockchain. As the stablecoin market continues to grow, so will Ethereum’s usage and fees.

Lending & Tokenized Assets

Decentralized protocols like Aave allow users to lend and borrow stablecoins. These activities typically require users to use Ethereum as a base layer protocol. Meanwhile, tokenized asset growth, which involves representing ownership of physical or financial assets as a digital token on a blockchain, is expected to grow significantly and could reach more than $16 trillion by 2030. Ethereum currently hosts more than 50% of all tokenized asset value.

Ethereum Adoption: ETFs, SharpLink, Trump

Like MSTR with Bitcoin, BMNR, and Ethereum should benefit from a snowballing effect as more companies follow their treasury strategy. For instance, SharpLink Gaming (SBET), whose chairman is Ethereum co-founder Joseph Lubin, is also adopting an Ethereum reserve strategy. Meanwhile, World Liberty Financial, a President Trump-linked crypto project, has also been buying ETH. Finally, ETH ETFs like the Grayscale Ethereum ETF (ETHE) and the iShares Ethereum ETF (ETHA) open ETH access to more investors, potentially spurring further demand.

Bottom Line

Crypto treasury companies are evolving beyond Bitcoin. While pioneers like MicroStrategy showed the world what was possible, companies like BitMine Immersion are now taking that playbook and applying it to Ethereum.

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This article originally published on Zacks Investment Research (zacks.com).

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