BMNR’s $25 billion audacious and ambitious leap into Ethereum is the talk of the crypto world, and with good cause. We’re talking about a potential paradigm shift here. Or it could just be a big whale shaking up a small pond. The immediate reaction? Euphoria. ETH jumps, everyone cheers, and the narrative is overwhelmingly positive: "BMNR is bullish on Ethereum! To the moon!" Let’s slow down, take a deep breath and start asking the tough questions. Is this a clever strategic masterstroke, or is something more nefarious afoot?
Decentralization Under Corporate Siege?
The crypto space is, at its core, founded on the concept of decentralization. It’s about decentralizing power, eliminating single points of failure, and giving people more agency. When one party acquires a dominant portion of an underlying asset on a network… At present, BMNR already accounts for about 1% of the ETH supply. Their stated goal is 5%. Five percent! That's not chump change. That's enough to exert considerable influence. So what does all this mean for the typical DeFi user? What does this all imply for the future of the Ethereum network?
It’s akin to one player purchasing all the properties in a game of Monopoly. Okay, that may be a smart business decision, but it creates a huge outsize competitive challenge for everyone else. Suddenly, everyone is beholden to BMNR's decisions. Their choices and eccentricities have an outsize ability to send ripples across the whole environment. Whether it’s gas fees, network congestion, or even the overall security of the chain, these strategic pivots have proven impacts. Of course, the price of ETH just shot up 9% this week, hitting an all-time high of $4,700. That’s awesome for the people who already owned ETH, but what happens to the people who were trying to buy in? As it stands, the barrier to entry just got massively higher, likely pricing out would-be investors with smaller stakes.
Consider this: If BMNR decides to dump a large portion of its ETH holdings (for whatever reason) the market could crash. It's a double-edged sword. While their start-up money inflates the value, the way they plan to cash out could be catastrophic. We’ve watched this play out over the years with other assets, and the outcomes are never beautiful.
Strategic Vision or Calculated Pump?
It’s clear that BMNR, which is headed by former State Senator Tom Lee, recognizes the value of Ethereum. Smart people, big money. But it’s not the fact of such an investment, it’s the scale that has people’s eyebrows climbing skyward. Might this be a purposeful calculation? Second, it could be intended to artificially raise the price of ETH, profiting BMNR at the long-term expense of ETH investors. It’s a good question, and perhaps the most important question regulators should be asking.
Think about it this way: BMNR isn't just buying ETH. They're increasing their at-the-market (ATM) stock offering from $4.5B to $24.5B specifically to buy ETH. It's a self-fulfilling prophecy. They take that capital and purchase ETH. The higher the price, the more valuable their holdings are, letting them raise even more capital. That’s a dangerous feedback loop that can all too easily spiral out of control.
We’ve witnessed the fallout from this kind of speculative behavior in other markets and on other assets. This kind of behavior always ends in bubbles and crashes. Remember the dot-com boom? Or the housing crisis? In pursuit of those short-term gains, it’s easy to overlook the risks below the surface and the results can be disastrous.
Regulation: Friend or Foe of Decentralization?
The crypto ecosystem is usually quick to push back against any calls for regulation. The case against it is that it hampers innovation and gets to the heart of what is supposed to be decentralization. Maybe even some small oversight is just what we need to avoid situations like this from running ridiculous lengths like this one.
Where is the line between strategic investment and market manipulation? It’s a difficult line, and the onus is on regulators to make it clear. Existing regulations as currently applied can fall short when it comes to meeting the distinctive challenges that the crypto space creates. We need much clearer rules of the road to protect everyday investors and keep the playing field level.
ETHZilla tech stock jump following Peter Thiel’s SEC filing on 1/3/22 or OKX’s OKB token quarterly buyback and burn resulting in a 130% price jump. The market is clearly susceptible to manipulation. This isn’t an attempt to hamstring innovation, this is a basic fairness and anti-abuse measure. It’s about leveling the playing field so the small guy doesn’t get just completely steamrolled by the big guys.
Our argument isn’t about whether BMNR’s decision is a good or bad thing in a vacuum. It’s not about being alarmist, it’s about being real about what’s at stake and the need to be watchful. The Ethereum community needs to have a serious conversation about the implications of centralized entities amassing significant control over the network. The future of those most vital aspects of DeFi may hang in the balance. If you’re one of the major players, this is your moment to think. Think about the leadership or precedent you wish to establish for the broader market.
