Author: Zhou , ChainCatcher

As the cryptocurrency market continued its decline, BTC and ETH once fell to around $60,000 and $1,500 respectively, with Strategy and Bitmine both suffering paper losses exceeding $10 billion. At the end of May, Strategy sold 32 BTC, breaking its long-standing narrative of not selling any tokens, and its leveraged cryptocurrency buying model entered a stress test phase.

Against this backdrop, Bitmine announced a high-profile issuance of Series A perpetual preferred shares with a 9.5% annualized return, raising approximately $274 million in net proceeds. As of press time, Bitmine increased its holdings by 127,000 ETH last week and purchased a total of 125,000 ETH over the past three days. Its current total holdings are approximately 5.66 million ETH, less than 400,000 ETH short of its 5% target.

As the most persistent and aggressive marginal buyer of ETH in the market, Bitmine continues to increase its holdings despite billions of dollars in unrealized losses. Now, even Bitmine needs preferred stock to replenish its flywheel. If the funding market changes and the coin-hoarding machine is forced to slow down, who will support the price of Ethereum?

Buy 5% before the end of the year, then what?

Bitmine began accumulating ETH in the second half of last year, planning to complete its "5% alchemy" within 5 years. Data shows that Bitmine raised $19.2 billion through 50 equity offerings between July 2025 and June 2026, with all funds used to buy ETH.

As of press time, Bitmine's Ethereum holdings have reached approximately 5.66 million, less than 400,000 short of the 5% target, and the actual progress in one year has exceeded 90% .

Of these, approximately 4.719 million ETH have been staked, representing over 85% of the total holdings, with an expected annualized staking yield of approximately $230 million to $296 million . This staking system is supported by the company's self-built MAVAN validator network, which is considered the most critical structural design that distinguishes Bitmine from Strategy.

However, the cost of aggressively accumulating cryptocurrency is also evident. Currently, the price of ETH is around $1650, while the company's holding cost is as high as approximately $3500. Its ETH treasury value is only about $9.3 billion, resulting in an overall loss of $10.5 billion, a drawdown of over 50% . The company 's stock price has also fallen nearly 90 % from its peak .

10x Research points out that Bitmine investors face two layers of losses. The first layer is the unrealized loss due to the decline in ETH prices, and the second layer is that investors paid a premium of approximately $4.6 billion relative to the underlying net asset value of ETH when purchasing BMNR stock. These two layers combined amplify the actual losses for shareholders.

Despite massive unrealized losses, Tom Lee characterizes this recent decline as superficial. He argues that the existing financial system suffers from a large number of fraudulent transactions, while Ethereum has never experienced fraudulent transactions, has lower operating costs, and its on-chain transaction volume and daily active addresses have both reached all-time highs. He believes the price correction is driven by macroeconomic factors and the receding leverage effect, and that its fundamentals remain intact. His longer-term bet is that AI agent systems will rely on the blockchain, and with the ETH supply continuing to shrink, Ethereum is the most direct beneficiary.

Tom Lee recently revealed that Bitmine expects to reach its 5% acquisition target by the end of 2026, at which point further acquisitions may not be necessary . He also mentioned that the company may be officially included in the Russell 1000 index by the end of June, which, based on its market capitalization at that time, would bring at least $2.15 billion in passive buying to BMNR.

How can a 3% pledge yield support a 9.5% dividend?

On June 5, Bitmine completed the pricing of its Series A perpetual preferred stock: 3.5 million shares at $80 each, with a par value of $100, raising net proceeds of approximately $274 million. The dividend yield is 9.5%, payable weekly in cash, and dividends accrue even if the board does not declare a dividend. Based on par value, the annualized dividend obligation is approximately $33.25 million .

Bitmine has an early redemption right. It can be redeemed at 110% of the par value within 18 months after issuance, at 105% of the par value between 18 months and 3 years, and at 100% of the par value after 3 years. Upon redemption, an additional payment of accumulated unpaid dividends will be required.

At first glance, the calculation is not difficult. By the end of May, Bitmine had staked a total of 4.7 million ETH, with an expected annualized staking return of approximately $230 million to $296 million, which is 8 to 9 times the annualized dividend obligation .

However, the projected value of over $200 million is based on the assumption that 4.7 million ETH have been fully staked recently. According to the prospectus, the company's staking income for the six months ending February 28, 2026, was $11.18 million, or approximately $22 million annualized.

It is worth noting that the staking yield is denominated in ETH, not USD. If ETH continues to fall, the company's staking income will also shrink accordingly.

Here is a fundamental difference between Bitmine and Strategy. BTC has no native returns, while Strategy's STRC has to pay dividends, relying solely on BTC price increases or selling coins. ChainCatcher has explained this in detail in the article "Strategy Cashes Out $2.5 Million, Bitcoin's Market Value Evaporates $80 Billion" .

ETH's staking mechanism offered Tom Lee a different path: staking rewards continued even when the price remained unchanged, without needing to use his initial investment. This is the real resilience advantage of the Bitmine model in the current bear market.

However, this path doesn't seem sustainable. Crypto KOL chenmo points out that while the initial issuance volume is low, covering dividends with staking returns isn't a major issue. But as the scale of preferred stock issuance continues to expand, the 3 to 4% staking yield is destined to be insufficient to cover the 9.5% annual interest rate. At that point , only a rise in ETH can sustain this logic .

Analyst Yuyue also stated that the STRC system is already under pressure in the current market, and issuing preferred shares at this time, even if it is a short-term positive, may be interpreted by the market as a worse signal .

According to CointelegraphMT research, two details in the prospectus for this offering are worth noting. The auditor was changed to KPMG on April 27th, and at the same time, it was disclosed that there were significant deficiencies in internal controls, the audit was not yet complete, and the financial data may have been restated.

In addition, the board of directors has complete discretion over dividend payments, and the only enforcement mechanism for preferred shareholders is to nominate two directors after not receiving dividends for 18 consecutive months.

If Bitmine stops buying after 5%, where will the price of ETH go?

On-chain analyst Yu Jin stated that at the current buying pace, the target price should be reached around next month . So, will they continue buying after reaching their target? If they stop, the last remaining staunch bullish force in the market will disappear; what will support ETH then?

Bitmine has been the most consistent and aggressive marginal buyer in the ETH market over the past year. Other potential buying is scattered and weak. The ETH spot ETF saw a net outflow of $173 million last week. Although it briefly turned positive on June 8 after 17 consecutive days of outflows, the magnitude was far less than the previous outflows.

Meanwhile, Goldman Sachs reduced its ETH ETF holdings by about 70% in the first quarter of 2026, and Harvard University's endowment fund completely liquidated its ETHA holdings of about $87 million, selling them all after only one quarter—for details on the entry and exit of institutional funds, see "Harvard and other institutions liquidate their holdings, 6 core talents leave in one month, what's wrong with Ethereum? "

Furthermore, the incremental institutional demand brought about by stablecoin legislation and RWA tokenization is a slow-moving variable and is unlikely to fill the gap on the scale of Bitmine in the short term.

Without a reversal in the overall crypto market, it's foreseeable that the treasury flywheel will become unsustainable. This will lead to: a continued decline in ETH prices, pressure on BMNR's share price, a narrowing of the premium relative to net asset value, a shrinking window for new share issuances, a slowdown in buying activity, and ETH further losing marginal support. This cycle doesn't even require Bitmine to actively sell a single ETH; the disappearance of buying power itself is sufficient.

Image source : AI generated

In a pessimistic scenario, if the funding market's acceptance of preferred shares declines, BMNR continues to hit new lows, and buying slows significantly, ETH may test the next key consensus level (around $1000). Andrei Grachev, co-founder of DWF Labs, believes that Strategy and Bitmine have a high chance of creating the biggest market crash in cryptocurrency history. This is a tail risk assessment and should not be taken as a baseline expectation.

In the baseline scenario, Bitmine maintains its buy rating, with staking rewards providing a buffer, preferred stock being successfully digested, and ETH consolidating in the $1500-$2000 range. Despite Bitmine's significant losses and the difficulty in ETH's short-term recovery, a 10x Research report notes that when stocks fall deeply enough, the underlying assets become almost irrelevant; investors are essentially buying pure options—free call options on a future ETH rebound, which are currently not fully priced into by the market.

In an optimistic scenario, the formal inclusion of Russell 1000 will bring passive funding, and the enactment of stablecoin legislation such as the GENIUS Act will clear obstacles for institutional entry. Standard Chartered Bank maintains its end-2026 ETH price target of $4,000, believing that the recent price decline does not reflect the continued improvement in the fundamentals of the Ethereum network. They liken the current situation to the period after the bursting of the Amazon bubble in 2001—the price temporarily decoupled from the network value, but infrastructure construction never stopped. The bank expects the ETH/BTC exchange rate to recover to approximately 0.08 by the end of this decade, with a year-end target price of $40,000 by 2030.

Conclusion

Ultimately, how long this funding can sustain Bitmine's flywheel depends on the price of ETH. However, Bitmine's own ETH purchases are also a crucial factor in supporting the price .

So the core issue is, once Bitmine achieves its 5% target and gradually fades out, who will take over? Traditional institutions are withdrawing, ETF funds are flowing in and out, and the real incremental demand brought by stablecoins and RWA has not yet materialized on a large scale.

Ethereum may not lack narratives, but when the liquidity inflection point will appear and where new marginal buyers will come from are the key questions that will determine the price trend of ETH next.

A certain whale traded ETH in eight rounds of long and short positions over two and a half days, making a profit of $3.67 million, a return of 122%.

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