Ethereum Supply Sovereignty Battle: Bitmine Rapidly Increases ETH Holdings by $130 Million, Whale Holdings Account for 70%

Famous investor Tom Lee’s crypto asset management company Bitmine has recently made a large purchase of approximately 44,463 ETH valued at around $130 million, bringing its total holdings to 4.11 million ETH, about 3.41% of the total ETH supply. This move is not isolated; on-chain data shows that “whale” addresses holding over 1,000 ETH now control up to 70% of ETH supply, indicating that market ownership is rapidly concentrating among institutions and large holders.

Meanwhile, within just 48 hours, Bitmine has staked over $1 billion worth of ETH, causing the validator queue to extend to nearly 13 days, further removing liquidity from the circulating market. These signs suggest an ongoing, institution-led “supply sovereignty” battle to control the scarcity of core crypto assets within the Ethereum ecosystem, which could fundamentally reshape market supply-demand dynamics and price stability.

Bitmine’s “Alchemy”: Investing $130 Million to Approach 5% of ETH Supply

Amid recent seasonal volatility and valuation pressures in the crypto market, an institution is quietly executing a large-scale accumulation plan. According to publicly available data, Bitmine, supported by renowned Wall Street analyst and Fundstrat co-founder Tom Lee, recently completed a major ETH acquisition worth about $130 million, adding 44,463 ETH. This increase lifts its total ETH holdings to 4.11 million, with a current market value exceeding $12 billion. More critically, this stake accounts for approximately 3.41% of ETH’s total circulating supply, highlighting Bitmine’s growing influence as a single entity within the Ethereum network.

Tom Lee describes Bitmine as the “largest new ETH buyer” during recent market weakness. He notes that year-end market conditions created an attractive accumulation window, as seasonal tax-loss harvesting pressured crypto valuations, and Bitmine capitalized on this period for strategic accumulation. This is not impulsive speculation but part of its long-term strategy. Bitmine publicly states its ultimate goal is to pursue the so-called “5% alchemy,” i.e., holding 5% of the total ETH supply long-term. Achieving this would make Bitmine the world’s leading single institutional ETH reserve, with profound implications for network governance, security, and market liquidity.

To reach this goal, Bitmine employs a dual strategy of “active staking and acquisitions.” On one hand, it continues to buy ETH from the market; on the other, it has staked over 408,627 ETH to earn network rewards, generating yield and increasing assets. The company also plans to expand its staking further from 2026 via the MAVAN validator network. Locking assets in staking contracts effectively removes these ETH from the secondary market circulation, earning rewards while reducing immediate sell pressure and laying the groundwork for potential future supply tightening.

Key Data on Bitmine’s Holdings and Staking

To clarify Bitmine’s strategic layout, here are its recent key activity figures:

Recent acquisition: 44,463 ETH, worth about $130 million

Total holdings: 4,110,000 ETH, worth approximately $122.5 billion

Percentage of total supply: about 3.41%

Staked amount: over 408,627 ETH

Long-term target: 5% of total supply

Company reserves: combined crypto and cash reserves of about $13.2 billion (including 192 BTC and other strategic holdings)

From Whales to Institutions: Who Controls 70% of ETH Supply?

Bitmine’s aggressive strategy is just a microcosm of the profound transformation in ETH ownership structure. Data from on-chain analysis firms like Milk Road shows that since late 2024, large ETH holders’ concentration has increased significantly. Currently, addresses holding over 1,000 ETH—often called “whales”—control about 70% of ETH supply. This means the majority of ETH ownership is concentrated among a small number of whales and institutions, contrasting sharply with Bitcoin’s early “retail-dominated” distribution.

This ownership concentration is driven by two main forces. First, traditional financial institutions and publicly traded companies are accelerating their entry. Besides Bitmine, firms like SharpLink Gaming and The Ether Machine have disclosed large ETH treasury holdings, with most or all of their ETH staked. For example, SharpLink Gaming has staked nearly all its ETH and earned about $29 million in staking rewards; The Ether Machine has staked its entire $1.49 billion ETH treasury and ranks highly in validator reward efficiency. These entities are not short-term traders but view ETH as a strategic reserve asset capable of generating cash flow.

Second, existing crypto whales continue to accumulate and consolidate. As Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS), the security model shifted from computational power to asset staking. This incentivizes large holders to lock assets long-term in staking contracts to participate in network security and earn yields. Additionally, the EIP-1559 fee burn mechanism means that during periods of high network activity, ETH issuance can turn into net deflation, reinforcing the long-term value narrative of “holding” rather than “trading.” This attracts capital seeking inflation hedges.

This evolution in ownership structure is causing a clear “decoupling”: retail holders’ share is decreasing while whales and institutions’ share is rising rapidly. This growing imbalance not only alters market dynamics but could also impact ETH’s price discovery. When most supply is locked or held by long-term holders, the circulating supply available for trading becomes scarce. While this can slow down declines during downturns, it may also lead to sharp upward price movements during demand surges due to liquidity shortages.

Chain Reaction from $1 Billion+ Staking: Validator Queue and Potential Supply Tightening

If continuous buying is “opening the floodgates,” then massive staking is “closing the sluice.” Bitmine’s rapid staking activity is a key development. Data from blockchain tracking platform Lookonchain shows that within a 48-hour window, Bitmine Immersion Technologies deposited over 342,000 ETH into the ETH staking contract, worth over $1 billion. This is one of the largest short-term staking inflows this year, with immediate market impact.

Ethereum’s proof-of-stake requires users to deposit at least 32 ETH to become validators and earn rewards. Deposited ETH enters an “activation queue,” and to exit staking and regain liquidity, users must go through an “exit queue.” Bitmine’s large staking operation caused a surge in validator activation requests, extending the ETH validator queue to 12 days 20 hours, with about 739,000 ETH waiting to be locked. Meanwhile, the exit queue is only 6 days 2 hours, involving about 349,000 ETH. This is the first time in months that the queued ETH awaiting activation nearly doubles the amount waiting to exit, indicating long-term position building rather than short-term liquidity needs.

This “more in, less out” imbalance is crucial for understanding current market dynamics. It points to a potential risk (or opportunity): supply tightening. Supply tightness occurs when demand for an asset increases while the tradable supply decreases. For ETH, staking locks ETH in smart contracts, effectively removing it from the liquid market. As of late December last year, about 35.8 million ETH (~28.88% of total supply) was staked, and this proportion continues to grow.

Post-Merge, ETH issuance has slowed significantly, and the EIP-1559 burn mechanism further reduces net issuance during busy periods, sometimes causing deflation. These structural factors mean staking not only delays future sell-offs but also permanently reduces circulating ETH supply. When exchanges and liquidity pools have fewer freely tradable ETH, even moderate demand can cause outsized price movements, especially in periods of low liquidity.

Why Are Institutions Competing to Accumulate ETH? Beyond Short-term Fluctuations, a Long-term Narrative

Why are institutions like Bitmine buying and staking heavily when ETH is below $3,000 and still far from recent highs? The answer lies in a solid long-term value narrative that transcends short-term price swings. The primary story is “interest-bearing digital sovereign debt.” Under PoS, staking ETH yields about 3-5% annualized, depending on network conditions. For companies holding billions in assets, this provides a stable, attractive cash flow. Allocating reserves to staking is seen as a value-adding strategy superior to holding cash or low-yield government bonds.

Another narrative emphasizes ETH’s role as the “core layer” of the crypto economy. Despite competition, ETH maintains a dominant position in developer activity, decentralized applications (DApps), total value locked (TVL), and institutional recognition. It is viewed as the infrastructure and settlement layer of blockchain, with network effects creating a strong moat. Institutional accumulation reflects investment in what they see as the most critical foundational protocol for future digital economies—akin to early investments in TCP/IP for the internet.

A third narrative revolves around “scarcity and deflation.” Bitcoin’s fixed supply of 21 million coins is called “digital gold,” while ETH, through staking and EIP-1559 burn, is moving toward an “elastic deflation” model. During high network activity, ETH burns can exceed new issuance, leading to net supply reduction. This dynamic deflation potential attracts capital seeking to hedge fiat inflation and traditional asset volatility. Institutions targeting a specific percentage of total supply (like Bitmine’s 5%) are betting on this scarcity value becoming more prominent over time.

Of course, there are differing opinions. For example, Arthur Hayes, co-founder of BitMEX, recently announced plans to sell his ETH holdings and buy DeFi assets, believing that in high-risk periods, some DeFi tokens may outperform ETH. This represents a more aggressive, beta-seeking investment approach. Conversely, institutions like Bitmine adopt a more conservative, core-asset allocation strategy. Both forces will coexist and influence future asset rotation patterns.

Market Outlook Under Supply Tightening: Price Stability and Retail Marginalization

As institutions and whales continue to absorb and lock supply, the market dynamics of ETH are subtly shifting. One immediate effect could be altered price volatility. In theory, when most circulating supply is held long-term, selling pressure diminishes, potentially making ETH more resilient during downturns, as holders lack strong incentives to sell at low prices. Over the past six months, despite volatility, ETH has gained over 22%, possibly reflecting long-term buying offsetting short-term selling.

However, this stability can be a double-edged sword. During uptrends, scarcity of circulating supply can cause even small buy orders to push prices sharply higher, creating “short squeeze” scenarios. Conversely, shallower market depth may lead to steeper slippage on large sell orders. These changes in liquidity structure and volatility patterns are environments traders must adapt to. Currently, ETH hovers around $2,950 after volatile days, testing this new supply-demand equilibrium.

Deeper challenges relate to the tension between Ethereum’s “decentralization” ideals and the reality of ownership centralization. When 70% of supply is concentrated in a few addresses, these whales wield significant influence over on-chain governance votes. While governance isn’t solely determined by token holdings, major upgrades (like future sharding) and staking pool choices are affected by large holders. Whether this economic centralization will erode governance decentralization remains a long-term concern.

For retail investors, this trend implies a need to adjust strategies. Direct competition with institutions for spot market positions becomes more costly and difficult. Participating in staking—via exchanges, liquidity derivatives, or running nodes—becomes a necessary way to share network growth benefits and hedge against asset dilution. Additionally, focusing on ETH-based derivatives, Layer 2 tokens, or DeFi blue chips favored by investors like Arthur Hayes may offer alternative avenues for excess returns. The market game is evolving from simple “buy and hold” to more complex “ecosystem positioning” and “yield strategies.” The supply sovereignty battle led by institutions like Bitmine will ultimately shape Ethereum’s future direction. While the outcome remains uncertain, the fundamental market structure has been permanently altered.