Ethereum crashes hard: major concern for companies with billions in reserves

The free fall of the Ethereum (ETH) price is putting pressure on companies with large crypto reserves. As the currency slides toward its lowest level since July, losses are running into billions. BitMine, the largest listed holder of ETH, is being hit especially hard.

BitMine loses 3.7 billion on Ethereum holdings

Ethereum has fallen more than 30 percent in less than a month. The price recently fell below the psychologically important limit of $ 3,000 and at the time of writing it is even at a price of $ 2,680. It is the lowest price since July.

Concerns are increasing due to the price drop. The positions of companies with large ETH reserves are coming under increasing pressure. BitMine, the largest public holders of Ethereum, among others, is finding itself in dire straits. The Bitcoin miner currently has an unrealized loss of $3.7 billion.

Data from StrategicReserve shows that BitMine owns 3.56 million ETH. At the current price of approximately $2,680, that amounts to a total valuation of $9.6 billion.

Other companies such as Galaxy Digital, The Ether Machine and SharpLink also report significant losses of 25 to 48 percent on their Ethereum holdings. The financial health of these companies is rapidly deteriorating now that the Ethereum price is in free fall.

Many of them now report an mNAV (market Net Asset Value) lower than one. This means that the total valuation of the company is worth less than the crypto they have on the balance sheet. This makes it more difficult, or even impossible, for these companies to attract external financing.

In a doomsday scenario, a downward spiral threatens if these companies are forced to sell their ETH positions. Many of them have financed their assets with borrowed money. To meet repayment obligations, it may be necessary to sell Ethereum. That would put further pressure on the price, causing new losses and even more selling. A downward spiral with potentially very serious consequences.

Tom Lee continues to cling to ‘super cycle’

Despite the bloody correction, Tom Lee, chairman of BitMine, continues to maintain an optimistic forecast. According to him, Ethereum is at the beginning of a super cycle similar to that of Bitcoin (BTC), with a potential of 100x increase. Despite recent declines, he sees this as an opportunity for long-term accumulation. According to him, volatility is an essential part of the growth process.

However, there remain signals that cause concern in the short term. Dutch analyst Ted points out that Ethereum has fallen through the crucial support zone of $ 2,800.

According to him, a recovery above this level is necessary to prevent further losses. If a breakthrough is not forthcoming, a decline towards the next support around $2,500 seems likely.