Taiki Maeda
December 17, 2025

Why I’m Shorting $1M of ETH (Again)

Taiki Maeda, a seasoned crypto trader, details his rationale for shorting Ethereum (ETH) with a $1 million position. He argues that ETH's current price is artificially inflated by a single large institutional buyer, "Tom Lee" (Bitmine), whose buying incentives are finite and nearing exhaustion, setting the stage for a significant price correction.

1. The "Tom Lee" Effect: Artificial Demand & Finite Incentives

  • "Tom Lee he bought 3% of ETH over 5 months... And ETH went from 2.5 to 2.9K. So, I think this slide alone kind of shows you everything you need to know about ETH the asset, whenever it just pumps like OG holders just dump because it's like prime exit liquidity."
  • Concentrated Buying Power: Bitmine, led by "Tom Lee," has acquired 3% of ETH's supply in just five months. This aggressive accumulation contrasts sharply with Michael Saylor's Bitcoin purchases, which took five years for a similar percentage.
  • Incentive-Driven Purchases: "Tom Lee's" buying is tied to performance-based compensation, including a potential $15 million cash bonus by January 15th, contingent on ETH holdings and price. This is like a company executive buying their own stock to hit quarterly targets.
  • Unsustainable Funding: Bitmine funds these ETH purchases by issuing and selling its own stock, a strategy the speaker views as unsustainable. This resembles a company raising capital by continuously diluting shareholders to fund asset purchases.
  • Impending Slowdown: The speaker anticipates a significant reduction in Bitmine's ETH buying after the January 15th board meeting, as key compensation targets are met and cash reserves dwindle.

2. Marginal Buyers & Market Structure

  • "I generally believe that crypto lacks marginal buyers and anyone that wanted to buy crypto has already bought and now we're kind of in this limbo phase where the euphoria is over... how low can all these things go?"
  • Lack of Organic Demand: The broader crypto market, particularly for altcoins, lacks genuine marginal buyers. Most interested parties have already entered, leaving a market in a "limbo phase" post-euphoria.
  • "Perceived Safety" Trap: "Tom Lee's" consistent buying creates a "perceived safety effect," encouraging other investors to hold ETH. This temporary comfort masks underlying market weaknesses.
  • Anticipating Exhaustion: Successful shorting requires anticipating when large institutional buyers will exhaust their capital or incentives, rather than waiting for the obvious market signal.
  • Cash for Lows: The speaker advocates for holding cash and shorting during these periods, emphasizing that "real money is made buying lows," which demands available capital.

3. Separating Tech Utility from Asset Value

  • "I think people have to learn to separate the asset from the product, right? They're two different things. They are related, but they're not. It's not that if the tech is good, it doesn't mean that ETH will go up forever."
  • Product vs. Asset: It is crucial to distinguish between the utility of Ethereum's technology (the "product") and the investment value of the ETH token (the "asset"). Good technology does not automatically guarantee asset appreciation.
  • L2s and App Chains: The rise of Layer 2s and application-specific chains means that while underlying blockchain infrastructure is used, value may accrue to the application's equity or its specific token, not necessarily the base layer token. For example, Robinhood building on Arbitrum Orbit benefits Robinhood equity, not necessarily the Arbitrum token.
  • "Moonboy Math" Disconnect: Many "ETH maxis" project unrealistic valuations based on abstract future adoption without critical analysis of how value actually accrues to the token.

Key Takeaways:

  • Strategic Implication: ETH's current price is likely a function of finite, incentive-driven institutional buying, not organic demand. A significant price correction is probable once this buying pressure subsides, particularly around the January 15th date.
  • Builder/Investor Note: Investors should consider shorting ETH or accumulating cash to prepare for potential market lows. Builders should focus on clear value accrual mechanisms for their own tokens or equity, rather than assuming automatic uplift from underlying infrastructure.
  • The "So What?": The market is shifting from euphoria to a more rational assessment of value. Understanding the difference between technological utility and asset investment potential is critical for navigating the next 6-12 months.

For more insights, watch the podcast: Link

This episode dissects the precarious market dynamics driving a $1 million ETH short, exposing the critical role of institutional buying incentives and looming macro catalysts.

The Previous Short Thesis: MicroStrategy's Exhaustion

  • The analyst recounts a successful ETH and altcoin short from the market top, predicated on MicroStrategy's (MSTR) diminishing buying power. This prior thesis identified a lack of marginal buyers as a key market vulnerability.
  • MicroStrategy's Net Asset Value (NAV) dwindled, signaling an end to its role as a major Bitcoin marginal buyer.
  • The anticipated Q4 market pump failed to materialize, exacerbated by an October 10th liquidation event.
  • Declining altcoin prices served as a leading indicator for reduced on-chain adoption and a drop in DeFi Total Value Locked (TVL), as yield opportunities evaporated.
  • “If Sailor can't buy, we lost one of the largest marginal buyers of Bitcoin, which is not great.”

The "Tom Lee Effect" and Bitmine's ETH Accumulation

  • The speaker identifies "Tom Lee" (associated with Bitmine) as the current primary marginal buyer propping up ETH. This aggressive buying creates a temporary floor but masks underlying weakness.
  • Tom Lee's buying activity has been substantial, acquiring 3% of ETH in five months, compared to Michael Saylor's 3% of Bitcoin over five years.
  • Despite significant capital deployment, ETH's price appreciation (from $2,500 to $2,900) is modest relative to Bitcoin's gains under Saylor's influence.
  • This suggests that existing ETH holders use these pumps as exit liquidity, limiting sustained upward momentum.
  • “Tom Lee he bought 3% of ETH over 5 months... And ETH went from 2.5 to 2.9K. So, I think this slide alone kind of shows you everything you need to know about ETH the asset.”

Incentive Structures Driving ETH Buys

  • The analyst details Tom Lee's compensation structure at Bitmine, revealing strong personal incentives to accumulate ETH and boost the company's stock price, particularly into year-end.
  • Tom Lee's performance-based compensation includes a potential $5-15 million annual cash bonus, tied to metrics like Bitcoin revenue, ETH accumulated, and Bitmine's stock performance.
  • He receives 500,000 shares (worth $15-20 million) upon Bitmine reaching 4% of total ETH supply and 1 million shares for 5%.
  • Bitmine sustains its buying power by issuing new stock (dumping $500 million worth) and using a portion ($300 million) to buy ETH, creating a reflexive loop.
  • “He's doing this because he's going to be rich... Show me the incentive and I'll show you the outcome.”

Confluence of Bearish Catalysts: January 15th

  • A critical date, January 15th, marks both Tom Lee's board meeting for his bonus and a potential deadline for MicroStrategy's MSCI delisting, creating a high-risk scenario for the broader crypto market.
  • Tom Lee is incentivized to maximize ETH accumulation and price performance leading up to his January 15th board meeting to secure his cash bonus.
  • Simultaneously, MicroStrategy faces a potential delisting from MSCI indices by January 15th, which could trigger billions in outflows and significant sell pressure on Bitcoin.
  • A MicroStrategy delisting would likely cause its Net Asset Value (NAV) to fall below one, potentially forcing Michael Saylor to sell Bitcoin to buy back stock.
  • “Imagine Tom Lee just like burning all his cash, buying ETH, and then MicroStrategy gets delisted and everything nukes and then they have no money.”

The Asset-Product Disconnect & Market Flows

  • The speaker argues that ETH's strong underlying technology does not guarantee asset appreciation, especially in a market devoid of structural marginal buyers. He emphasizes the importance of understanding market flows over technological merit alone.
  • On-chain activity for ETH mainnet remains low, despite scaling efforts and Layer 2 (L2) growth, challenging narratives of widespread global adoption.
  • The analyst contends that ETH's current $350 billion market cap is inflated by Digital Asset Treasuries (DATs) like Bitmine, rather than organic demand.
  • He highlights a "hard pill to swallow": good technology (e.g., Arbitrum Orbit stack for Robinhood) can benefit businesses without necessarily boosting the underlying token's value.
  • “People have to learn to separate the asset from the product. They're two different things... if the tech is good, it doesn't mean that ETH will go up forever.”

Investor & Researcher Alpha

  • Capital Flow Shift: The market's reliance on Digital Asset Treasuries (DATs) for marginal buying is unsustainable. Capital is not flowing into organic growth but rather into a "PvP game" between large players.
  • Bottleneck Identification: The primary bottleneck for ETH's price is the finite buying power and incentive-driven accumulation of entities like Bitmine. Once these sources are exhausted, significant downside risk emerges.
  • Obsolete Research Direction: Solely focusing on technological advancements or "product-market fit" for blockchain infrastructure without analyzing market structure and marginal buyer dynamics is insufficient for investment theses.

Strategic Conclusion

The current ETH price is artificially inflated by incentive-driven institutional buying. Once these marginal buyers exhaust their capital or their incentives wane, ETH will likely converge to a significantly lower fair value. The industry must shift focus from speculative narratives to sustainable, organic demand.

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