Why Bit Digital Sold Its Bitcoin to Bet on Ethereum and AI

The first wave of crypto treasury companies asked a simple question: Which digital asset should we own?

Bit Digital CEO Sam Tabar thinks that's already the wrong question.

As public companies have followed Strategy's playbook by building corporate crypto treasuries around different digital assets, Tabar believes simply accumulating Bitcoin or Ethereum won't be enough to create lasting shareholder value. The next generation of winners, he argues, will own businesses that generate real cash flow alongside their crypto holdings—and those businesses will increasingly be tied to artificial intelligence.

Bit Digital began making that bet long before Ethereum treasury companies became Wall Street's latest trend. Last year, the company followed through on shedding its Bitcoin position in favor of Ethereum, and leaned into powering AI by launching a new publicly traded bet on computing infrastructure.

"We realized that this technology is actually very different," Tabar told Coinage, describing the company's reaction to ChatGPT. "We believe that artificial intelligence is the third catalyst in society and capitalism."

Read More from Coinage:

• Bitcoin Drops Below $60K as Strategy's STRC Crashes to All-time Low

• Why Trump's Crypto Project Is Launching Its Own Dollar

Rather than viewing AI as a completely new industry, Bit Digital saw familiar building blocks.

"How is artificial intelligence actually powered?" Tabar said. "What's the backbone of this? As Bitcoin miners, we realized that it comes down to basically power contracts with data centers and specialized hardware, specialized infrastructure. Well guess what? Bitcoin miners can actually... understand that language."

Indeed, many of the largest Bitcoin miners have executed the pivot well. The CoinShares Bitcoin Mining ETF is up 173% over the last year as investors have taken notice that many of the leading Bitcoin miners have successfully upconverted their mining facilities into data centers. Like others in the set, Bit Digital pivoted away from continuing to invest in Bitcoin mining equipment to redirect that capital toward AI infrastructure.

"When we announced that we were no longer investing in Bitcoin mining equipment, but rather we were going to focus our investment into artificial intelligence, we got a lot of Bitcoin purists who would throw tomatoes at us on Twitter," Tabar recalled.

The company eventually spun that business into WhiteFiber, a separately traded AI infrastructure company, while Bit Digital retained roughly a 70% ownership stake. Looking back, Tabar says the criticism didn't age particularly well.

"We were the first ones to lean in very heavily in artificial intelligence," he said. "They said we were wrong. It turns out they were wrong and we were right."

That AI pivot also set up Bit Digital's next controversial decision.

"When we IPOed that business, we also announced ... that we were going to sell all our Bitcoin and buy Ethereum," Tabar said. "That was a double whammy." While many investors viewed the move as simply swapping one digital asset for another, Tabar says the rationale was tied to where he believes AI applications will ultimately live.

"We realized that smart contract technology is not Bitcoin's natural home," he said. "That really belongs to Ethereum." It's a view shaped by years building inside Ethereum rather than simply investing in it. Before leading Bit Digital, Tabar co-founded Fluidity, the team behind AirSwap, before the company was acquired by Consensys.

"I understand Ethereum not just as a speculative buy from a price action perspective," he said. "I understand what the infrastructure can do."

That infrastructure-first mindset also explains why Tabar believes the current crop of digital asset treasury companies will eventually need to evolve.

"We think that being a pure-play DAT is wrong," he said. "That's really dependent... on the movements of where Ethereum is."

Tabar also believes Wall Street ultimately wants something crypto treasury companies largely don't have today: predictable earnings.

"Wall Street cannot really value DATs properly because there's no future P&L," he said. "That's why research coverage on DATs is not robust." His prediction is that today's treasury companies will eventually begin looking less like passive holders of crypto and more like operating businesses.

"Pure-play DATs, I predict, will be buying P&L businesses," Tabar said. "We're also speaking to a number of different candidates for acquisition — Ethereum adjacent companies that throw off P&L."

For Tabar, the convergence between AI and Ethereum resembles the internet in its earliest days. In the mid-1990s, he argues, few people could have predicted companies like Uber or Tinder. Likewise, it's still too early to know exactly what AI agents will look like — or how they'll transact.

"The permutations of how AI and Ethereum... are going to intersect, it's so hard for me to predict," he said. "When the internet became mainstream in the mid-90s, there was just no way anybody could predict Tinder or Uber."

Still, he believes Ethereum is better positioned than competing blockchains to become the financial layer beneath that future.

"I think Ethereum has been really the platform of choice for Wall Street," Tabar said. "The majority of stablecoins... are built on Ethereum, and Wall Street can't handle downtime or centralized situations."

Subscribe to the free Coinage newsletter to stay up-to-date on all things crypto and finance.