Summary I'm downgrading Bitmine Immersion Technologies, Inc.

and selling my last lot after a 77% run since my July upgrade, when Ethereum bottomed near $1,750.

Bitmine now adds roughly 10x less ETH per week than a year ago, and it already cut the buybacks started in July and August, during ETH's weakest months this year.

BMNP preferred coupons run 9.5% a year in weekly cash installments, about 29% of operating cash flow, while staking pays Bitmine in ETH.

That mismatch bites when ETH falls.

With Bitmine nearing 5% of ETH supply, the next move is a pivot toward a broader holdings company.

I'd avoid new positions at this point.

I am exiting my position and downgrading BMNR to neutral, citing increased risk and better opportunities elsewhere.

I last covered Bitmine Immersion Technologies, Inc.

( BMNR ) back in July, when Ethereum ( ETH-USD ) hit a low around $1,750.

It had brought BMNR, largely an ETH treasury company, down with it.

I foresaw a rebound, gave the upgrade, and now here we are, 77% higher.

But keep in mind that BMNR is still ~45% below my initial coverage of it, where I dubbed it at “ peak risk ” and worth avoiding until it had stabilized.

So, this thing is not out of the woods yet, per se.

Seeking Alpha But my Buy was tactical and was never a long-term position.

Even though we're not out of the woods, I think we're past the easy part, and that's made me rethink my position in recent weeks.

I've been slowly trimming on the way up, and now I'm down to my last lot.

I think it's time for it to go as well.

Bitmine is an ETH proxy with Leverage The first thing we should note is what Ethereum is doing, since Bitmine is effectively a proxy for corporate leverage (and some minor investing on the side in “moonshots”) for Ethereum.

The idea is that since Ethereum is largely more of a machine than a currency, the owners of the machine will benefit significantly.

This has given rise to the “alchemy of 5%,” or Bitmine Chairman and famous investor Tom Lee's belief that once the firm owns >5% of the supply, their ownership becomes a snowball that can cash flow (via a system called " staking ") so much that it will pay their preferred shares, Bitmine Immersion Technologies, Inc.

9.5 SER A CUM PREF STK ( BMNP ), and give them enough cash to continue snowballing their treasury in size.

And that dynamic has kept the firm in lockstep with ETH with few exceptions.

But it's working; they've officially crossed six million Ethereum tokens held, with 4.9% of total global supply now sitting in their treasury.

Alongside their $16.1B ETH stockpile sits $672M in cash, $180M in a (not often marked) stake in Beast Industries , and a $115M stake in Eightco Holdings ( ORBS ), as well as $17.8M in Bitcoin ( BTC-USD ).

ETF Portfolio Mechanics The Cashflow Is Changing But just as much as it could've been that I and they got lucky calling the ETH bottom in July, they could just be benefiting from liquidity sloshing around and pushing ETH up.

Consider that Bitmine was not buying the dip in July; they reduced their buying significantly through the lowest two months of the year for ETH's price.

They're currently adding 10x less than they were at this point last year, when ETH was ~35% higher than it is now.

When it was at its lows, so was Bitmine's buying.

ETF Portfolio Mechanics They redirected some buying into the share buybacks, bringing 11.6M shares in July and 9.2M shares, but it seems like the plan stopped just as fast as it started, with no repurchases in the past month.

ETF Portfolio Mechanics Their repurchase plan did little to stop the flow of shares outstanding.

This chart stops in July at the last 10-Q , before they bought back shares.

But the 21M they bought back pales in comparison to the >80M they've issued YTD.

So it's a win to see buybacks instead of more issuance.

I expect the next update of this figure to be slightly lower, although just slightly.

The Future Looks Murky for ETH & BMNR I write this subheader not just for effect, but because I'm serious.

Ethereum and BMNR stock were just in different places in July.

Their average price of $2.7k meant that buying then lowered their cost basis.

Now, they're almost out of being underwater, but just barely, and it's no longer such a boon to buy more ETH at this point since they're so close to their goal.

This is likely to be a time of transition for BMNR, especially once it hits its alchemy goal in the coming weeks.

Just continuing buying more ETH isn't as clear of a “best path forward” as it was a few months ago.

I believe Bitmine sees this too, which is why they were not aggressively buying ETH in July and August, and began working toward lowering their share count.

This is exactly the time in speculative firms that they make bad decisions.

I am taking my gains and minimizing my exposure to the risk of executing the change from just a digital treasury corp.

to a full digital holdings company.

BMNR has been working on it, but now it looks like the time to make the transition.

If it goes wrong, an ETH bull market will only do so much for them.

They could end up making bets on other altcoins or new media holding companies that make the firm harder to value or disconnect from ETH.

It's never been more unclear about where BMNR goes from here.

I have nothing particular to say about Chairman Tom Lee, although his ideas are often divisive, but I can say that he will have an idea of what to do with the cash coming in from staking, well, what doesn't go to the preferred coupons , which BMNR pays 9.5% p.a.

in weekly installments.

Those coupons from BMNP are going to eat up some cash flow, and that's an important consideration; they currently make up 29% of operating cash flow and would take up 5% of the current cash pile to pay for the next year.

That being said, I see a liability in that they have to pay their investors cash, but their staking pays them in ETH.

This is good when ETH is rising but bad when ETH is falling, compared to the dollar.

A Side Note on Technicals This is actually a decent-looking chart showing recovery from a bad tumble, but it's still not showing high strength.

This is a “middle of the road” chart to me, very similar to its macro outlook.

I don't hate it, but I don't particularly like it.

Momentum indicators like RSI are strong and not overbought, but the MACD is near flat as the 50-day moving average moves toward the 200-day.

But those two moving averages are still in a bearish configuration, and their crossing would be a positive sign.

That could also mark a leg lower should BMNR not hold on to its current position; a small fall from here opens up to having little technical floor.

Barchart Conclusion Bitmine is a stock that I trade, not something I plan to own for a long time.

To that end, I'm happy with the run from July to now, and I've decided to exit my position.

The firm is finally reaching 5% of ETH's supply, but that just means that they have to decide what to do with their cash next and how they can put it to work in other ventures.

That prospect introduces more risk and may make BMNR less of a leveraged play on Ethereum.

So I'm taking my gains (what's left of them, now down to a percentage of my original position), pleased with how the trade went, and searching for other opportunities.

Within the realm of speculative stocks, I've been looking at adding to my nuclear ETF lately; I just see other opportunities that look better than holding onto these shares.

So I am downgrading BMNR and suggest not taking new positions at this point.

Long-term ETH bulls shouldn't sell on just my analysis, and neither should those who believe in Tom Lee's leadership.

But for me, I'm neutral on both, so this is where I get off the train, at least for now.

Thanks for reading.