Original Title: Medici Level Up with Tom Lee, Chairman of BitMine
Source: Medici Network
Original text compiled by: Azuma, Odaily Planet Daily
Editor’s Note: What is the strongest buying power behind ETH's recent surge? The answer undoubtedly lies with the ETH treasury company. With the continuous increase in holdings by BitMine (BMNR) and Sharplink Gaming (SBET), the influence over ETH has quietly shifted — for details, please refer to "Unveiling the Two Key Players Behind ETH's Recent Surge: Tom Lee VS Joseph Rubin."
Strategic ETH Reserve data shows that as of September 4th, Beijing time, BitMine's ETH holdings have reached 1.87 million coins, valued at approximately $8.16 billion. BitMine's leader, Tom Lee, has long become the largest whale with the most influence in the current Ethereum ecosystem.
On the evening of September 3rd, Tom Lee participated in an interview on the Level Up podcast under Medici Network. In the conversation, Tom Lee discussed ETH's positioning in the global financial sector, the rise of BitMine as a leading ETH treasury, and the macroeconomic conditions surrounding digital assets. Tom Lee also shared his views on the long-term potential of cryptocurrencies, the vision of decentralization, and how BitMine plans to further increase its reserves.
The following is the original interview content, translated by Odaily Planet Daily — for the sake of reading fluency, some content has been omitted.
· Host: Can you briefly share your story? How did you get involved in the cryptocurrency market? (While introducing Tom Lee, the host referred to him as "the man with the coolest hairstyle on Wall Street," in addition to his regular title.)
Tom Lee: To put it simply, after graduating from university (at Wharton School), my entire career has basically revolved around one job, which is researching the market. I started my career at Kidder, Peabody & Company, focusing on the technology sector, especially wireless communications, from 1993 to 2007.
That experience taught me some important things. Wireless communication was still in its infancy at that time - there were only 37 million mobile phones globally, while today it is close to 8 billion, and the growth is exponential. But what surprised me was that many customers were actually very skeptical of wireless technology at that time - in their view, the core business of the telecommunications industry was long-distance and local calls, and mobile phones were just an "upgraded version of a wireless phone," which might become free in the future.
So I realized at that time: fund managers in their forties and fifties often cannot truly understand technological disruption because they are essentially beneficiaries of the status quo. After that, I became the chief strategist at JPMorgan and held that position until 2014. Subsequently, I founded Fundstrat, with the initial intention of establishing the first Wall Street firm that aimed to "popularize institutional research"—that is, to make research that was originally only available to hedge funds and large asset managers accessible to a broader public. We aimed to open up the research services that were originally provided to hedge funds and large institutions to the public.
Then around 2017, I started noticing news saying that Bitcoin had broken through the $1,000 mark. This reminded me of the time when I was in the foreign exchange team at JPMorgan, where we had discussed Bitcoin multiple times, when its price was still below $100. The core of the discussion was whether this digital currency could be recognized as a form of currency.
However, at JPMorgan, the attitude is very negative, believing that Bitcoin is merely a tool for drug dealers and smugglers. But in my 20 years of professional career, I have never seen an asset rise from below $100 to $1,000, with a market cap exceeding $10 billion. This is definitely not something to be overlooked; I must study it.
So we started to study. Although at that time I could not fully understand why "proof-of-work blockchain" could become a store of value, I found that the rise of Bitcoin by over 90% from 2010 to 2017 could be explained by just two variables: the number of wallets and the activity level of each wallet.
Based on these two variables, we can even model and deduce the possible future trends of Bitcoin. This was the "journey" when I first truly entered the crypto space. Thus, when the price of Bitcoin was still below $1,000, we released our first white paper. We proposed that if someone viewed Bitcoin as an alternative to gold, and it only captured 5% of the gold market, then the fair price of Bitcoin would be $25,000. This was our prediction for the price of Bitcoin in 2022, and by 2022, the price of Bitcoin indeed hovered around $25,000.
· Host: You just talked about BTC, but you are also doing some interesting things with ETH. Can we discuss the macro opportunities for ETH?
Tom Lee: For a long time, almost from 2017 to 2025, our core view in the cryptocurrency space has been that Bitcoin occupies a very clear position in many people's portfolios. The reason is that it has not only been validated in terms of scale and stability, but more importantly, it can serve as a means of value storage.
When we think again about how investors should allocate in crypto assets aside from Bitcoin, there are many projects on the market—such as Solana, Sui, and various projects that you often write about. However, starting from this year, we are seriously reevaluating Ethereum.
The reason is: I believe that this year the regulatory environment in the United States is developing in a favorable direction, which is causing Wall Street to start taking cryptocurrencies and blockchain more seriously. Of course, the real "killer application" or the so-called ChatGPT moment here is actually stablecoins and Circle's IPO, followed by the "Genius" bill and the SEC's Project Crypto plan.
I believe there are many favorable factors for ETH here, but the main point is that when we observe the asset tokenization projects being promoted on Wall Street, whether it's the US dollar or other assets, the vast majority are being conducted on Ethereum.
Moreover, and more importantly, I believe people need to take a step back and look at what is happening on Wall Street in 2025; it is very similar to the historical moment in 1971. In 1971, the US dollar decoupled from gold and abandoned the gold standard. At that time, gold indeed benefited, and many people bought gold, but the real core is not that gold benefited, but that Wall Street initiated financial innovation—because suddenly, the dollar became fiat currency, no longer backed by gold, and people had to establish new circulation and payment "tracks" for dollar transactions. Therefore, the real winner is Wall Street.
By 2025, the innovations brought by blockchain are solving a multitude of problems, and Wall Street is migrating to the "track" of crypto, which I see as ETH's "moment of 1971." This will create tremendous opportunities to migrate vast amounts of assets and transactions onto the blockchain. Ethereum will not be the only winner, but it will be one of the main winners.
From the perspective of institutional adoption, I've heard a lot of relevant discussions. BTC has already become very institutionalized. When I meet with investors, they all know how to build models and how to think about BTC's future value. So, BTC has already entered many portfolios. In contrast, the holding rate of ETH is still very low, more like BTC in 2017.
I believe that ETH is not yet truly regarded as an "institutional asset" today, so it is still in a very early stage, which is also the reason I think ETH has greater opportunities.
· Host: I know you set a target price of around 60,000 USD for Ethereum. How did you come up with this prediction?
Tom Lee: Yes, that's right. But I must clarify, (60,000 USD) this is not a short-term target. So don't come to me on December 31st and criticize me for 'not rising that much'; this is not the kind of prediction that is due to be fulfilled next week.
In fact, what I was quoting at that time was an analysis we did for ETH, which was completed by Mosaics and some other researchers. Their idea is to consider the present as a turning point similar to that of 1971. They approached the value of Ethereum from two angles: first, as a payment rail, and second, that Ethereum could occupy a share of the payment market. I believe these two concepts can be combined.
Their idea is that if you look at the market covered by the banking system and assume that half of it will move to the blockchain, then Ethereum could capture about $3.88 trillion in value; then you look at Swift and Visa, which can process about $450 billion in payments annually. If we assume each transaction incurs a gas fee and convert it into network revenue, giving it a relatively conservative 30 times price-to-earnings ratio, you would arrive at an estimated valuation of about $3 trillion. Adding these two parts together, Ethereum's reasonable valuation should be around $60,000, which means there is about 18 times growth potential from now.
· Host: Recently, the positive outlook for ETH is largely related to the continuous buying by digital asset treasury companies. As the chairman of BitMine, how do you think investors should view different investment avenues, such as making trade-offs between ETFs, spot markets, and treasury company stocks?
Tom Lee: First of all, if someone wants to gain exposure to ETH through an ETF, that's completely fine, as it allows you to invest directly in ETH without a significant price gap, just like a BTC ETF gives you direct exposure to BTC.
But if you look at MicroStrategy, its size is larger than the largest BTC ETF. In other words, more investors are willing to hold BTC indirectly through MicroStrategy compared to ETFs. The reason is simple: treasury companies do not give you a static ETH position; they are actually helping you increase the amount of ETH corresponding to each share. MicroStrategy is an example: when they shifted to a BTC strategy in August 2020, the stock price was about $13, and it has now risen to $400, increasing approximately 30 times over five years, while BTC itself rose from 11,000 to 120,000 during the same period, an increase of about 11 times. This shows that MicroStrategy successfully increased the amount of BTC held per share, while the BTC ETF remained unchanged during this time.
In other words, an ETF could potentially earn you 11 times your investment over five years, but MicroStrategy, with its treasury strategy, can allow investors to earn even more. They leverage the liquidity and volatility of stocks to continuously increase their holdings of BTC per share. This is exactly Michael Saylor's strategy, which has transformed an initial BTC value of $1 or $2 per share to today’s equivalent of $227, representing a significant increase.
· Host: You just mentioned that traditional investors are showing increased interest in Ethereum. I'm curious, over the past few months, what changes have you noticed in the attitudes of some non-crypto native institutional clients when discussing treasury companies?
Tom Lee: To be honest, most people are quite skeptical when looking at crypto treasuries. Indeed, many investors in MicroStrategy have made a decent profit, but even so, its holders are not as widespread as you might think, as there are still a large number of institutions that simply do not believe in cryptocurrencies. For example, a recent survey by Bank of America shows that 75% of institutional investors have zero exposure to crypto. This means that three-quarters of them have never touched crypto assets at all. So when they see treasury companies, the first reaction is: "It's better to just buy the tokens directly."
So we spent a lot of time educating them in the meeting. Taking BitMine's data as an example, the difference is that the treasury company can help you increase the amount of ETH corresponding to each share. For instance, when we transitioned to ETH treasury on July 8, each share corresponded to only 4 dollars of ETH. By the update on July 27, each share corresponded to 23 dollars of ETH, nearly a 6-fold increase in just a month. This gap is very significant, demonstrating the "per share ETH acceleration effect" brought by the treasury strategy.
· Host: There are many ETH treasury companies on the market, but obviously BitMine is moving the fastest. How did you manage to do that?
· Tom Lee: I think MicroStrategy has provided a great template. The first BTC treasury company was actually Overstock, but it didn't really convince investors, and its stock price didn't benefit. Saylor is the first person to do this in a more scaled and systematic way, which has indeed inspired us. So our strategy at BitMine is: to maintain an extremely clear and simple path, relying entirely on common stock for operations, avoiding complex derivative structures, so that investors can understand it at a glance. In the future, we may increase strategies that utilize volatility or market cap scale, but the first step is to have a clear strategy that convinces shareholders.
Why is this important? Because investors need to believe that they are buying not just ETH, but a long-term macro trading opportunity. Just like Palantir can achieve a premium valuation, not only because of its products but because shareholders feel they own something "meaningful." What we need to do is help investors understand that Ethereum is indeed one of the biggest macro trading trends for the next 10 to 15 years.
· Host: Regarding the premium topic of treasury companies, Michael Saylor once mentioned that he would use ATMs (issuing new shares in the open market) more aggressively within a premium range of 2.5 to 4 times. I think among all treasury companies, you have been more aggressive in increasing net asset value (NAV) through ATMs, right? You might even do this at lower premium levels, but it has allowed you to achieve sustained and strong NAV growth. How do you consider the appropriate premium multiple? As Saylor said, he is at one extreme, believing that anything less than 4 times is not worth strong action. What do you think?
Tom Lee: I think there's a strange mathematical problem here.
In theory, every financial instrument requires a certain trade-off - this may be a bit technical for the audience - common stock is actually a very good financing tool because it gives everyone an equal opportunity for upside and has no conflicts of interest - whether old or new shareholders are betting on the company's future success.
However, when you finance with convertible bonds, the situation is different. Buyers will not only pay attention to the stock price but will also be concerned with capturing volatility and may even hedge to eliminate volatility. Preferred stocks and debt are essentially liabilities — although the ETH treasury company can pay off the debt through staking returns, that financing is still debt. Debt holders do not care about the company's success; they only care about the interest payments.
Therefore, if you introduce conflicting motivations and different incentives when changing the capital structure, it could actually harm the company—too many convertible bonds could suppress volatility, which in turn hinders the flywheel effect (volatility is indeed the foundation of stock liquidity).
Therefore, it is difficult for you to accurately grade the ranges of operations. Another thing to keep in mind is that in the next crypto winter (which is inevitable), companies with the simplest balance sheets will come out on top. This way, you won’t be forced to finance at a discount due to payment obligations, nor will you create a natural short position due to derivative structures—leading to more short selling when stock prices drop due to coverage requirements, resulting in a death spiral. This is why Bitmine maintains a simple structure.
If the premium of the treasury company is only 10% above NAV, it is difficult to justify the operation of the ATM - mathematically, issuing shares at a 1.1x premium requires selling 100% of the circulating shares (which would double the total share capital) to have a positive impact on each share of ETH holdings. However, if operating at a 4x premium, it only requires selling 25% of the shares to double the amount of ETH held per share. I guess that’s Saylor's logic, but my thinking is different; I believe it might be better to think more strategically.
· Host: You mentioned the inevitability of down cycles. We have experienced several crypto winters. What impact do you think this will have on treasury companies?
Tom Lee: It's hard to say, but the best analogy might be the oil service industry. The simplest analogy for cryptocurrency treasury companies is oil companies, where investors can buy oil, buy oil contracts (even physical delivery), but many people are buying shares of oil companies like ExxonMobil or Chevron, which always trade at a premium over proven reserves because these companies are actively acquiring more oil.
When the capital market becomes unfriendly, companies with more complex capital structures will collapse. During the crypto winter, the valuation discrepancies will be larger, and companies with the cleanest balance sheets can acquire assets, possibly even trading at a discount below net asset value.
· Host: Are you saying that there will be some mergers/integrations between the treasury companies?
Tom Lee: Yes, those people at Bankless mentioned a very good point. They said that in the Bitcoin treasury race, MicroStrategy is obviously far ahead, but in the Ethereum treasury race, there is currently no absolute leader. As it stands now, everyone is still able to secure funding smoothly, so it’s not yet time for consolidation.
If there is really going to be integration, I think it is more likely to happen in the Bitcoin treasury market, because Bitcoin has already had a significant price increase (although I am still bullish and believe it can rise to 1 million dollars), but Ethereum is still in an earlier stage of value realization. So the situation you just described is more likely to occur on top of Bitcoin.
· Host: You mentioned earlier about maintaining a clean balance sheet. During the crypto winter, if the company's stock price is discounted, would you consider repurchasing shares? Would that be achieved through issuing bonds, or would you keep extra cash reserves outside of your ETH position?
Tom Lee: That's a good question, but we can only discuss it on a theoretical level. First of all, I don't believe there will be a crypto winter in the near future. To be clear, we remain bullish on the market, so I don't expect a winter to occur soon. Of course, at some point in the future, there will definitely be one, and by then BitMine will have several sources of cash flow:
First, from our traditional main business;
Second, from staking rewards, because staking income can be converted into fiat currency when necessary for executing buybacks, theoretically even achieving a buyback scale of 3%, which is actually quite large;
Third, consider whether to use the capital market to support buybacks.
At that time, the companies with the cleanest balance sheets could do a lot. For example, they could use ETH as collateral for loans, and the market interest rates were known, so there would be many ways to do it, but in practice, each company would be different. If the balance sheet is complex, it is basically impossible to self-insure during a discount.
· Host: To keep BitMine's stock price above its NAV, would you consider mergers and acquisitions? Because this would add value from the perspective of each share of ETH. At what discount level do you think acquisitions would make sense?
Tom Lee: I believe every company has its own algorithm. If a company has significant upside potential in ETH but its stock price cannot exceed NAV, it is simply following the Beta exposure of ETH. Those companies that can achieve a premium must make Alpha choices. In other words, you can buy more ETH to gain Beta exposure, but to surpass it, you must have an Alpha strategy.
The reasons for a company's discount may vary, such as poor liquidity, high debt, complex operations, etc., all of which can lead to reasonable premiums or discounts.
· Host: Changing the topic, although it's not directly related to BitMine, I want to ask, do you think MicroStrategy will be included in the S&P 500 in September?
Tom Lee: The work of the S&P 500 committee is confidential, but they do a great job. If you look at historical data, over 20% of the index returns every 10 years come from companies that were not included in the index ten years ago. In other words, they (the S&P 500) are actually engaging in active stock selection, rather than mechanically picking based on rules.
In fact, their performance is much better than that of broad market indices like the Wilshire 5000, and also better than the Russell 1000 (market-cap weighted). This indicates that they are not just selecting the largest companies, but are also making thematic judgments. AI is certainly a focus, and Crypto is also very important, while they will consider reducing the weight sensitive to commodities.
· Host: Speaking of indexes, BitMine is growing rapidly. Is it possible for it to be included in some indexes?
Tom Lee: The S&P series is temporarily impossible because it requires positive net profit, which can only be achieved after we start native staking. The Russell index is quantitative and only looks at trading volume and free float market capitalization. The threshold for the Russell 1000 is about $5 billion, and the restructuring happens every June. Starting in 2026, it will change to every six months. By this standard, BitMine has already far exceeded the threshold.
· Host: I think we've covered our discussion for today. This has been a great conversation. Finally, do you have any summaries or key points you'd like to leave for the audience?
Tom Lee: I want to summarize: we are actually witnessing a historic moment in the financial industry. Because blockchain has solved many problems, democratizing finance and breaking the gatekeeper structure that once controlled resources. Even in discussions about universal basic income, blockchain and cryptocurrencies can provide solutions. Therefore, I believe we should not only be optimistic about the short-term prices of Bitcoin and Ethereum, but also recognize the profound positive impact they have on society.
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"Ethereum's New Guru" Tom Lee: Why Bet $8 Billion on ETH?
Original Title: Medici Level Up with Tom Lee, Chairman of BitMine
Source: Medici Network
Original text compiled by: Azuma, Odaily Planet Daily
Editor’s Note: What is the strongest buying power behind ETH's recent surge? The answer undoubtedly lies with the ETH treasury company. With the continuous increase in holdings by BitMine (BMNR) and Sharplink Gaming (SBET), the influence over ETH has quietly shifted — for details, please refer to "Unveiling the Two Key Players Behind ETH's Recent Surge: Tom Lee VS Joseph Rubin."
Strategic ETH Reserve data shows that as of September 4th, Beijing time, BitMine's ETH holdings have reached 1.87 million coins, valued at approximately $8.16 billion. BitMine's leader, Tom Lee, has long become the largest whale with the most influence in the current Ethereum ecosystem.
On the evening of September 3rd, Tom Lee participated in an interview on the Level Up podcast under Medici Network. In the conversation, Tom Lee discussed ETH's positioning in the global financial sector, the rise of BitMine as a leading ETH treasury, and the macroeconomic conditions surrounding digital assets. Tom Lee also shared his views on the long-term potential of cryptocurrencies, the vision of decentralization, and how BitMine plans to further increase its reserves.
The following is the original interview content, translated by Odaily Planet Daily — for the sake of reading fluency, some content has been omitted.
· Host: Can you briefly share your story? How did you get involved in the cryptocurrency market? (While introducing Tom Lee, the host referred to him as "the man with the coolest hairstyle on Wall Street," in addition to his regular title.)
Tom Lee: To put it simply, after graduating from university (at Wharton School), my entire career has basically revolved around one job, which is researching the market. I started my career at Kidder, Peabody & Company, focusing on the technology sector, especially wireless communications, from 1993 to 2007.
That experience taught me some important things. Wireless communication was still in its infancy at that time - there were only 37 million mobile phones globally, while today it is close to 8 billion, and the growth is exponential. But what surprised me was that many customers were actually very skeptical of wireless technology at that time - in their view, the core business of the telecommunications industry was long-distance and local calls, and mobile phones were just an "upgraded version of a wireless phone," which might become free in the future.
So I realized at that time: fund managers in their forties and fifties often cannot truly understand technological disruption because they are essentially beneficiaries of the status quo. After that, I became the chief strategist at JPMorgan and held that position until 2014. Subsequently, I founded Fundstrat, with the initial intention of establishing the first Wall Street firm that aimed to "popularize institutional research"—that is, to make research that was originally only available to hedge funds and large asset managers accessible to a broader public. We aimed to open up the research services that were originally provided to hedge funds and large institutions to the public.
Then around 2017, I started noticing news saying that Bitcoin had broken through the $1,000 mark. This reminded me of the time when I was in the foreign exchange team at JPMorgan, where we had discussed Bitcoin multiple times, when its price was still below $100. The core of the discussion was whether this digital currency could be recognized as a form of currency.
However, at JPMorgan, the attitude is very negative, believing that Bitcoin is merely a tool for drug dealers and smugglers. But in my 20 years of professional career, I have never seen an asset rise from below $100 to $1,000, with a market cap exceeding $10 billion. This is definitely not something to be overlooked; I must study it.
So we started to study. Although at that time I could not fully understand why "proof-of-work blockchain" could become a store of value, I found that the rise of Bitcoin by over 90% from 2010 to 2017 could be explained by just two variables: the number of wallets and the activity level of each wallet.
Based on these two variables, we can even model and deduce the possible future trends of Bitcoin. This was the "journey" when I first truly entered the crypto space. Thus, when the price of Bitcoin was still below $1,000, we released our first white paper. We proposed that if someone viewed Bitcoin as an alternative to gold, and it only captured 5% of the gold market, then the fair price of Bitcoin would be $25,000. This was our prediction for the price of Bitcoin in 2022, and by 2022, the price of Bitcoin indeed hovered around $25,000.
· Host: You just talked about BTC, but you are also doing some interesting things with ETH. Can we discuss the macro opportunities for ETH?
Tom Lee: For a long time, almost from 2017 to 2025, our core view in the cryptocurrency space has been that Bitcoin occupies a very clear position in many people's portfolios. The reason is that it has not only been validated in terms of scale and stability, but more importantly, it can serve as a means of value storage.
When we think again about how investors should allocate in crypto assets aside from Bitcoin, there are many projects on the market—such as Solana, Sui, and various projects that you often write about. However, starting from this year, we are seriously reevaluating Ethereum.
The reason is: I believe that this year the regulatory environment in the United States is developing in a favorable direction, which is causing Wall Street to start taking cryptocurrencies and blockchain more seriously. Of course, the real "killer application" or the so-called ChatGPT moment here is actually stablecoins and Circle's IPO, followed by the "Genius" bill and the SEC's Project Crypto plan.
I believe there are many favorable factors for ETH here, but the main point is that when we observe the asset tokenization projects being promoted on Wall Street, whether it's the US dollar or other assets, the vast majority are being conducted on Ethereum.
Moreover, and more importantly, I believe people need to take a step back and look at what is happening on Wall Street in 2025; it is very similar to the historical moment in 1971. In 1971, the US dollar decoupled from gold and abandoned the gold standard. At that time, gold indeed benefited, and many people bought gold, but the real core is not that gold benefited, but that Wall Street initiated financial innovation—because suddenly, the dollar became fiat currency, no longer backed by gold, and people had to establish new circulation and payment "tracks" for dollar transactions. Therefore, the real winner is Wall Street.
By 2025, the innovations brought by blockchain are solving a multitude of problems, and Wall Street is migrating to the "track" of crypto, which I see as ETH's "moment of 1971." This will create tremendous opportunities to migrate vast amounts of assets and transactions onto the blockchain. Ethereum will not be the only winner, but it will be one of the main winners.
From the perspective of institutional adoption, I've heard a lot of relevant discussions. BTC has already become very institutionalized. When I meet with investors, they all know how to build models and how to think about BTC's future value. So, BTC has already entered many portfolios. In contrast, the holding rate of ETH is still very low, more like BTC in 2017.
I believe that ETH is not yet truly regarded as an "institutional asset" today, so it is still in a very early stage, which is also the reason I think ETH has greater opportunities.
· Host: I know you set a target price of around 60,000 USD for Ethereum. How did you come up with this prediction?
Tom Lee: Yes, that's right. But I must clarify, (60,000 USD) this is not a short-term target. So don't come to me on December 31st and criticize me for 'not rising that much'; this is not the kind of prediction that is due to be fulfilled next week.
In fact, what I was quoting at that time was an analysis we did for ETH, which was completed by Mosaics and some other researchers. Their idea is to consider the present as a turning point similar to that of 1971. They approached the value of Ethereum from two angles: first, as a payment rail, and second, that Ethereum could occupy a share of the payment market. I believe these two concepts can be combined.
Their idea is that if you look at the market covered by the banking system and assume that half of it will move to the blockchain, then Ethereum could capture about $3.88 trillion in value; then you look at Swift and Visa, which can process about $450 billion in payments annually. If we assume each transaction incurs a gas fee and convert it into network revenue, giving it a relatively conservative 30 times price-to-earnings ratio, you would arrive at an estimated valuation of about $3 trillion. Adding these two parts together, Ethereum's reasonable valuation should be around $60,000, which means there is about 18 times growth potential from now.
· Host: Recently, the positive outlook for ETH is largely related to the continuous buying by digital asset treasury companies. As the chairman of BitMine, how do you think investors should view different investment avenues, such as making trade-offs between ETFs, spot markets, and treasury company stocks?
Tom Lee: First of all, if someone wants to gain exposure to ETH through an ETF, that's completely fine, as it allows you to invest directly in ETH without a significant price gap, just like a BTC ETF gives you direct exposure to BTC.
But if you look at MicroStrategy, its size is larger than the largest BTC ETF. In other words, more investors are willing to hold BTC indirectly through MicroStrategy compared to ETFs. The reason is simple: treasury companies do not give you a static ETH position; they are actually helping you increase the amount of ETH corresponding to each share. MicroStrategy is an example: when they shifted to a BTC strategy in August 2020, the stock price was about $13, and it has now risen to $400, increasing approximately 30 times over five years, while BTC itself rose from 11,000 to 120,000 during the same period, an increase of about 11 times. This shows that MicroStrategy successfully increased the amount of BTC held per share, while the BTC ETF remained unchanged during this time.
In other words, an ETF could potentially earn you 11 times your investment over five years, but MicroStrategy, with its treasury strategy, can allow investors to earn even more. They leverage the liquidity and volatility of stocks to continuously increase their holdings of BTC per share. This is exactly Michael Saylor's strategy, which has transformed an initial BTC value of $1 or $2 per share to today’s equivalent of $227, representing a significant increase.
· Host: You just mentioned that traditional investors are showing increased interest in Ethereum. I'm curious, over the past few months, what changes have you noticed in the attitudes of some non-crypto native institutional clients when discussing treasury companies?
Tom Lee: To be honest, most people are quite skeptical when looking at crypto treasuries. Indeed, many investors in MicroStrategy have made a decent profit, but even so, its holders are not as widespread as you might think, as there are still a large number of institutions that simply do not believe in cryptocurrencies. For example, a recent survey by Bank of America shows that 75% of institutional investors have zero exposure to crypto. This means that three-quarters of them have never touched crypto assets at all. So when they see treasury companies, the first reaction is: "It's better to just buy the tokens directly."
So we spent a lot of time educating them in the meeting. Taking BitMine's data as an example, the difference is that the treasury company can help you increase the amount of ETH corresponding to each share. For instance, when we transitioned to ETH treasury on July 8, each share corresponded to only 4 dollars of ETH. By the update on July 27, each share corresponded to 23 dollars of ETH, nearly a 6-fold increase in just a month. This gap is very significant, demonstrating the "per share ETH acceleration effect" brought by the treasury strategy.
· Host: There are many ETH treasury companies on the market, but obviously BitMine is moving the fastest. How did you manage to do that?
· Tom Lee: I think MicroStrategy has provided a great template. The first BTC treasury company was actually Overstock, but it didn't really convince investors, and its stock price didn't benefit. Saylor is the first person to do this in a more scaled and systematic way, which has indeed inspired us. So our strategy at BitMine is: to maintain an extremely clear and simple path, relying entirely on common stock for operations, avoiding complex derivative structures, so that investors can understand it at a glance. In the future, we may increase strategies that utilize volatility or market cap scale, but the first step is to have a clear strategy that convinces shareholders.
Why is this important? Because investors need to believe that they are buying not just ETH, but a long-term macro trading opportunity. Just like Palantir can achieve a premium valuation, not only because of its products but because shareholders feel they own something "meaningful." What we need to do is help investors understand that Ethereum is indeed one of the biggest macro trading trends for the next 10 to 15 years.
· Host: Regarding the premium topic of treasury companies, Michael Saylor once mentioned that he would use ATMs (issuing new shares in the open market) more aggressively within a premium range of 2.5 to 4 times. I think among all treasury companies, you have been more aggressive in increasing net asset value (NAV) through ATMs, right? You might even do this at lower premium levels, but it has allowed you to achieve sustained and strong NAV growth. How do you consider the appropriate premium multiple? As Saylor said, he is at one extreme, believing that anything less than 4 times is not worth strong action. What do you think?
Tom Lee: I think there's a strange mathematical problem here.
In theory, every financial instrument requires a certain trade-off - this may be a bit technical for the audience - common stock is actually a very good financing tool because it gives everyone an equal opportunity for upside and has no conflicts of interest - whether old or new shareholders are betting on the company's future success.
However, when you finance with convertible bonds, the situation is different. Buyers will not only pay attention to the stock price but will also be concerned with capturing volatility and may even hedge to eliminate volatility. Preferred stocks and debt are essentially liabilities — although the ETH treasury company can pay off the debt through staking returns, that financing is still debt. Debt holders do not care about the company's success; they only care about the interest payments.
Therefore, if you introduce conflicting motivations and different incentives when changing the capital structure, it could actually harm the company—too many convertible bonds could suppress volatility, which in turn hinders the flywheel effect (volatility is indeed the foundation of stock liquidity).
Therefore, it is difficult for you to accurately grade the ranges of operations. Another thing to keep in mind is that in the next crypto winter (which is inevitable), companies with the simplest balance sheets will come out on top. This way, you won’t be forced to finance at a discount due to payment obligations, nor will you create a natural short position due to derivative structures—leading to more short selling when stock prices drop due to coverage requirements, resulting in a death spiral. This is why Bitmine maintains a simple structure.
If the premium of the treasury company is only 10% above NAV, it is difficult to justify the operation of the ATM - mathematically, issuing shares at a 1.1x premium requires selling 100% of the circulating shares (which would double the total share capital) to have a positive impact on each share of ETH holdings. However, if operating at a 4x premium, it only requires selling 25% of the shares to double the amount of ETH held per share. I guess that’s Saylor's logic, but my thinking is different; I believe it might be better to think more strategically.
· Host: You mentioned the inevitability of down cycles. We have experienced several crypto winters. What impact do you think this will have on treasury companies?
Tom Lee: It's hard to say, but the best analogy might be the oil service industry. The simplest analogy for cryptocurrency treasury companies is oil companies, where investors can buy oil, buy oil contracts (even physical delivery), but many people are buying shares of oil companies like ExxonMobil or Chevron, which always trade at a premium over proven reserves because these companies are actively acquiring more oil.
When the capital market becomes unfriendly, companies with more complex capital structures will collapse. During the crypto winter, the valuation discrepancies will be larger, and companies with the cleanest balance sheets can acquire assets, possibly even trading at a discount below net asset value.
· Host: Are you saying that there will be some mergers/integrations between the treasury companies?
Tom Lee: Yes, those people at Bankless mentioned a very good point. They said that in the Bitcoin treasury race, MicroStrategy is obviously far ahead, but in the Ethereum treasury race, there is currently no absolute leader. As it stands now, everyone is still able to secure funding smoothly, so it’s not yet time for consolidation.
If there is really going to be integration, I think it is more likely to happen in the Bitcoin treasury market, because Bitcoin has already had a significant price increase (although I am still bullish and believe it can rise to 1 million dollars), but Ethereum is still in an earlier stage of value realization. So the situation you just described is more likely to occur on top of Bitcoin.
· Host: You mentioned earlier about maintaining a clean balance sheet. During the crypto winter, if the company's stock price is discounted, would you consider repurchasing shares? Would that be achieved through issuing bonds, or would you keep extra cash reserves outside of your ETH position?
Tom Lee: That's a good question, but we can only discuss it on a theoretical level. First of all, I don't believe there will be a crypto winter in the near future. To be clear, we remain bullish on the market, so I don't expect a winter to occur soon. Of course, at some point in the future, there will definitely be one, and by then BitMine will have several sources of cash flow:
First, from our traditional main business;
Second, from staking rewards, because staking income can be converted into fiat currency when necessary for executing buybacks, theoretically even achieving a buyback scale of 3%, which is actually quite large;
Third, consider whether to use the capital market to support buybacks.
At that time, the companies with the cleanest balance sheets could do a lot. For example, they could use ETH as collateral for loans, and the market interest rates were known, so there would be many ways to do it, but in practice, each company would be different. If the balance sheet is complex, it is basically impossible to self-insure during a discount.
· Host: To keep BitMine's stock price above its NAV, would you consider mergers and acquisitions? Because this would add value from the perspective of each share of ETH. At what discount level do you think acquisitions would make sense?
Tom Lee: I believe every company has its own algorithm. If a company has significant upside potential in ETH but its stock price cannot exceed NAV, it is simply following the Beta exposure of ETH. Those companies that can achieve a premium must make Alpha choices. In other words, you can buy more ETH to gain Beta exposure, but to surpass it, you must have an Alpha strategy.
The reasons for a company's discount may vary, such as poor liquidity, high debt, complex operations, etc., all of which can lead to reasonable premiums or discounts.
· Host: Changing the topic, although it's not directly related to BitMine, I want to ask, do you think MicroStrategy will be included in the S&P 500 in September?
Tom Lee: The work of the S&P 500 committee is confidential, but they do a great job. If you look at historical data, over 20% of the index returns every 10 years come from companies that were not included in the index ten years ago. In other words, they (the S&P 500) are actually engaging in active stock selection, rather than mechanically picking based on rules.
In fact, their performance is much better than that of broad market indices like the Wilshire 5000, and also better than the Russell 1000 (market-cap weighted). This indicates that they are not just selecting the largest companies, but are also making thematic judgments. AI is certainly a focus, and Crypto is also very important, while they will consider reducing the weight sensitive to commodities.
· Host: Speaking of indexes, BitMine is growing rapidly. Is it possible for it to be included in some indexes?
Tom Lee: The S&P series is temporarily impossible because it requires positive net profit, which can only be achieved after we start native staking. The Russell index is quantitative and only looks at trading volume and free float market capitalization. The threshold for the Russell 1000 is about $5 billion, and the restructuring happens every June. Starting in 2026, it will change to every six months. By this standard, BitMine has already far exceeded the threshold.
· Host: I think we've covered our discussion for today. This has been a great conversation. Finally, do you have any summaries or key points you'd like to leave for the audience?
Tom Lee: I want to summarize: we are actually witnessing a historic moment in the financial industry. Because blockchain has solved many problems, democratizing finance and breaking the gatekeeper structure that once controlled resources. Even in discussions about universal basic income, blockchain and cryptocurrencies can provide solutions. Therefore, I believe we should not only be optimistic about the short-term prices of Bitcoin and Ethereum, but also recognize the profound positive impact they have on society.
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