The Bitcoin treasury company model pioneered by Strategy is going fully mainstream. In fact, Wall Street is now adapting this business model for other cryptocurrencies beyond just Bitcoin.
On June 30, Tom Lee of Fundstrat announced that he was becoming the chairman of BitMine Immersion Technologies, a tiny Bitcoin mining company. But here's the twist: He's going to transform that Bitcoin-centric company into an Ethereum (ETH +1.78%) treasury company. The company will buy Ethereum, not Bitcoin, for its balance sheet.
Tom Lee is very bullish on Ethereum. He recently told CNBC that he thinks Ethereum has the potential to become "the new Bitcoin." Is he right?
Ethereum's historical track record
To answer that question, all you need to know is that Ethereum has a stellar track record, and has often been highlighted as the one cryptocurrency capable of "flipping" Bitcoin. That is, Ethereum is the one cryptocurrency in the world capable of surpassing Bitcoin in market cap.
That's due in part to the remarkable historical returns of Ethereum. When it launched in July 2015, Ethereum traded for less than $1. Ten years later, it trades for $2,595. That's a head-spinning return on investment within a relatively short period.
CRYPTO: ETH
Key Data Points
Admittedly, Ethereum has been struggling of late, down 22% for the year. And it doesn't show signs of turning around anytime soon, even with the support of the Trump administration, which made Ethereum one of the keystone cryptocurrencies for its new U.S. Digital Asset Stockpile.
The convergence of Wall Street and crypto
Tom Lee is not focused on the past, he's focused on the future. And what he sees happening is a grand convergence of traditional financial services and crypto.
Historically, Ethereum has been the one blockchain that dominates the world of decentralized finance (DeFi), which is the blockchain version of traditional finance.
For example, Ethereum has a staggering 55% market share of total value locked (TVL), a key metric for measuring DeFi activity. No other blockchain even comes close. Solana only has a 7% market share. And Base, the blockchain launched by Coinbase Global, only has a 3% market share.
Image source: Getty Images.
When you look at the investments being made by World Liberty Financial, the crypto venture affiliated with the Trump family, they all seem to involve Ethereum or DeFi. Given that Ethereum is such a DeFi powerhouse, this makes sense.
This is important to point out because just about everyone admits that Bitcoin will never be a DeFi powerhouse. Right now, Bitcoin only has a 5.5% market share of TVL. So Ethereum is approximately 10x bigger than Bitcoin when you take into account only this one factor.
Stablecoins change everything
I've saved the best for last: Ethereum is also a giant when it comes to stablecoins. These stablecoins are cryptocurrencies that are pegged 1:1 to the value of another asset, usually the U.S. dollar.
These stablecoins are -- you guessed it -- extraordinarily important to decentralized finance. They are the easiest way for mainstream Wall Street institutions to gain access to blockchain-based yield strategies.
Moreover, stablecoins are becoming some of the biggest buyers of U.S. T-bills, since this government debt can be used to preserve the dollar peg. As a result, Treasury Secretary Scott Bessent recently predicted that stablecoins will become a $2 trillion industry within a few years.
As Tom Lee points out, roughly 50% of all stablecoin transaction activity is now taking place on the Ethereum blockchain, and roughly 30% of all transaction volume on the Ethereum blockchain is linked to stablecoins. So he sees these stablecoins driving tremendous value for Ethereum in the future.
Caveats for investors
All of this sounds fantastic, right? Investors get a cryptocurrency with a stellar track record. This cryptocurrency is also at the forefront of the fastest-growing sector of the crypto market. And this cryptocurrency has the direct attention of the Trump administration. What could possibly go wrong?
For one thing, Ethereum faces a tremendous amount of competition from other blockchains, many of which are also trying to become "the blockchain" for stablecoins. Tron, a competing blockchain with support from the Trump family, is second only to Ethereum for stablecoin transaction activity.
Also, keep in mind: Vitalik Buterin, the legendary founder of Ethereum, warned earlier this year that he doesn't want the Ethereum blockchain to become a Wall Street casino. Even though the White House has made every signal that it wants to include Ethereum in its vision of crypto, there's been little reciprocal show of support from Buterin.
Before you jump right in and assume that Ethereum will become "the new Bitcoin," make sure you do your due diligence. Right now, Ethereum seems to be the frontrunner for this title, but there are plenty of other competitors out there in the crypto market.
