Bit Digital, a publicly traded bitcoin miner, bought 8,568 ether on May 11 at an average price of $2,334, spending roughly $20 million. It was the company's first ether purchase since October. Days later, ether's price slid below $2,000, leaving the firm with an unrealized loss of about $3 million.
Why the company bought now
Bit Digital had not added to its ether holdings in seven months. The May 11 acquisition brought its total ether stack to an undisclosed figure. The purchase price was near the top of a recent range for the cryptocurrency, which has traded between roughly $2,000 and $2,400 since mid-April. The company did not disclose its rationale for the timing.
The 15% slide that followed
Ether dropped 15% after Bit Digital's buy, slipping below $2,000 for the first time in several weeks. The decline erased paper gains from earlier in the month and pushed the entire position into the red. At current prices, the loss on paper equals about 15% of the initial outlay — a hit that the company will have to account for on its balance sheet.
What happens to the position
Unrealized losses only become real if Bit Digital sells. The firm has not said whether it plans to hold, add to, or reduce its ether position. Its last public filing showed it held a mix of bitcoin and ether, with bitcoin making up the bulk of its digital asset portfolio. The company’s next quarterly report will reveal how it accounted for the ether position and whether any hedging was in place.
