BitMine stock advanced on Monday as Ethereum broke back above $2,700 and the company disclosed another increase in its ETH treasury, putting its holdings within reach of the 6 million mark.

• BitMine stock gained about 6% as Ethereum moved above $2,700.
• BitMine increased its Ethereum treasury to 5.98 million ETH, or roughly 4.9% of circulating supply.
• The company has 5.07 million ETH staked as it moves closer to its 5% treasury target.

BMNR traded around $27.45 in premarket trading, up about 5.7% from Friday's close of $25.99. Ethereum changed hands near $2,730, a gain of roughly 6% over 24 hours. BitMine also disclosed that its Ethereum holdings had reached 5.98 million tokens, and it valued its crypto, cash, marketable securities and other investments at $17.1 billion as of Sept.20.

BitMine's Dollar-Cost Averaging Strategy Has Paid Off

Tom Lee's BitMine has executed one of the most effective dollar-cost averaging (DCA) strategies in corporate history. DCA is a process in which an investor allocates capital and continues to accumulate an asset over time, even when it is falling. It is often seen as a better alternative to buying an asset in a lump sum.

BitMine started its Ethereum accumulation in July last year and has since bought more than 5.983 million coins. It has purchased weekly, even when prices dropped to $1,500 in July this year.

The benefit of the DCA approach is that it positions an accumulator to make more money once the price starts rising. In this case, the coins BitMine bought when Ethereum dipped to $1,500 have gained by 81% as the coin has jumped back over $2,700.

BitMine is now nearing its goal of holding 5% of all Ethereum in circulation. Assuming that amount is 6 million coins, the company now needs to buy just 16,000 more ETH.

Ethereum Price Has Broken Out

The ongoing BMNR stock rally is happening because Ethereum has finally broken out on the charts. The coin formed a golden cross pattern on September 6, as its 50-day moving average jumped above the 200-day moving average. Since then, it has been forming a bullish flag pattern — a vertical rally line followed by a horizontal channel — which usually leads to more gains over time.

The token has now moved above the upper side of the flag, confirming the breakout, and has crossed the important resistance level of $2,460, its highest level on April 16 this year, meaning Ethereum now trades at levels last seen in mid-April. These technicals suggest the coin has more upside to go. If the rally extends, Ethereum may jump to the next key resistance level at $3,000, and a surge above that price would point toward further gains at $3,380 — the high from December last year and January this year. A move to that level would bring the current value of BitMine's Ethereum holdings to over $20 billion.

BitMine Revenue to Jump if ETH Holds Gains

The ongoing Ethereum rebound is important for BitMine for two main reasons. First, it will help boost the value of the company's ETH holdings because BitMine is now the biggest holder of the token — the higher ETH jumps, the better its balance sheet becomes. Second, the rally means its revenue will continue rising. Unlike Michael Saylor's Strategy, the bitcoin-focused treasury company that pioneered the corporate crypto accumulation model, BitMine makes money by staking its Ethereum holdings and earns an annual return about 2.7%. Staking is the process of locking ETH to help secure Ethereum's proof-of-stake network and earn rewards in return, and BitMine's 5.07 million staked ETH — roughly 85% of its total stack — is what generates that yield.

The company will likely hit its 6 million ETH holdings target this week. Assuming the staking yield remains at 2.7% over the next 12 months, BitMine would earn roughly 162,000 coins as revenue. Assuming Ethereum remains around $3,000 over that period, that revenue would be worth $486 million.

BitMine Stock Has Crossed a Key Resistance

The daily chart shows that BMNR has finally made a bullish breakout, jumping above the important resistance level of $27.17, which it had failed to clear since August and which marked the upper side of a bullish flag pattern. The stock is also about to form a golden cross pattern, with its 50-day and 200-day moving averages at $21.6 and $22.52, respectively. A crossover could lead to more gains, potentially to $30 and above.

This article is for informational purposes only and does not constitute financial or investment advice. Equity and cryptocurrency investments involve risk, and past performance does not guarantee future results.

This article first appeared on The Market Periodical.