Staking ETH for steady profits of $46 million—why is BitMine still stuck with massive losses?

Oluwapelumi Adejumo

Chopper

BitMine is aggressively building its Ethereum holdings, seeking to convert them into a source of stable cash flow. In the previous quarter, its staking business generated nearly $46 million in revenue.

However, the $92.1 million loss from derivative options fully wiped out the staking gains. Combined with continuously rising asset management costs and the company’s aggressive share issuance, the room for profit for existing shareholders has been significantly squeezed.

The company’s Q3 fiscal year 2026 financial results as of May 31 show that revenue surged from $2.1 million in the same period last year to $46.5 million. Of that amount, 98% ($45.7 million) came from staking and node validation businesses. BitMine is accelerating the divestment of its Bitcoin mining business and has fully shifted to an Ethereum treasury-holding model.

Behind the sharp growth in revenue, the company’s net loss this quarter was $83.6 million, compared with only a modest loss of $623,000 in the same period last year—its loss magnitude has expanded rapidly.

Options blowout wipes out all Ethereum staking earnings

The core factor dragging down this quarter’s performance is the company’s Ethereum derivative options trading strategy. In this quarter, BitMine incurred a total loss of $92.1 million from Ethereum-related derivatives—about twice the total revenue of its staking business in the same period. Of that, $78.6 million came from net losses on expiring option contracts, and $14.0 million came from losses on exercised positions. The $534,000 gain generated by open contracts only offset some of the losses slightly.

In the same period last year, the company conducted no derivative trading, resulting in a qualitative leap in its risk exposure in asset management. In the first nine months of the current fiscal year, cumulative losses on derivatives totaled $133.3 million, including $79.3 million in losses from exercises and $54.5 million in losses from expiring contracts. Only $515,000 was profit from open contracts. In the same period, staking and validation businesses generated total revenue of only $56.9 million, and the scale of derivative losses exceeded staking revenue by more than two times.

BitMine stated that its options strategy is mainly based on selling put options, as part of an overall position management plan. Selling put options can earn premiums and allow adding to assets when prices fall, but once the market moves in the opposite direction and the contracts are exercised under unfavorable terms, it will result in massive losses. This large-scale loss is enough to show that the attempt to enhance returns through options has, for now, fully offset the stable income generated by node staking.

Meanwhile, the company’s administrative and general management expenses surged from $744,000 in the same period last year to $37.3 million. Management explained that the increase was mainly driven by digital asset custody and asset management service fees, higher salaries, and increased board compensation in cash and stock.

Before excluding changes in the valuation of crypto assets, staking revenue was sufficient to cover this quarter’s cost of sales and management expenses. Even after excluding multiple non-cash items, the company’s own adjusted non-GAAP net loss still reached $70.8 million. This earnings report shows that the node validation business has formed a substantial and stable cash flow, but the overall position trading strategy continues to consume staking profits.

Continued issuance of BMNR shares stockpiles Ethereum, sharply diluting shareholder equity

Nearly all of the funds BitMine used to stockpile Ethereum came from the issuance of common stock in the public market, with the entire cost borne by existing shareholders. Within the nine months ended May 31, under an on-exchange share issuance program, the company cumulatively sold 340.7 million shares of BMNR common stock, raising $11.87 billion after issuance expenses. In the same period, it spent $11.69 billion to buy Ethereum.

Shareholders’ equity has been heavily diluted. The number of outstanding common shares increased by 149% over the nine months, rising from 232.4 million shares as of August 31, 2025 to 579.7 million shares by the end of May 2026; issuance continued even after the quarter ended, and as of July 9 the total shares outstanding had reached 603.2 million shares.

Based on equity financing, as of May 31 BitMine cumulatively held 5.42 million ETH, with a combined holding cost of $19.05 billion. At the time of writing, the holdings had increased to 5.70 million ETH.

BitMine’s key metrics, source: BitMine Tracker

At the end of May, the market value of this batch of Ethereum holdings was only $10.86 billion. The book unrealized loss was about $8.2 billion, and the unrealized loss ratio was 43%.

This impairment of the holdings is the main source of the company’s $9.04 billion unrealized losses on digital assets over the first nine months of the current fiscal year. During the same period, the company’s cumulative net loss was $9.1 billion. The massive unrealized loss directly reflects that BitMine bought Ethereum at high prices by issuing shares, with all risk borne by shareholders.

In the shareholders’ meeting in January this year, approval was given to raise the cap on the company’s authorized common stock from 500 million shares to 50 billion shares. This authorization does not mean the company must issue the full amount, but it grants management ample room to continue issuing shares to purchase digital assets and make other investments.

BitMine cautioned that the ability to expand Ethereum holdings depends heavily on financing channels remaining open and operating smoothly. If the price of Ethereum declines, the company’s share price weakens, and investors’ willingness to subscribe cools down, subsequent financing costs will rise, and the company may even be limited in its ability to issue securities on favorable terms.

The conditions supporting this business model are not only the annualized staking returns and any subsequent rise in Ethereum’s price; shareholders must also accept significant dilution of equity, have their holdings carry unrealized losses on the order of the hundreds of millions for years, and continuously provide funding so the company can hoard coins.

Long-term service contracts raise staking operating costs and compress profit space

BitMine relies on its staking business to hedge fluctuations in the position price, but the supporting long-term cooperation agreements generate fixed fees and revenue-sharing, continuously compressing overall profit. The company signed a 10-year consulting agreement with third-party service provider Ethereum Tower. In this quarter, it spent $12.8 million for this, about 28% of total staking revenue for the period. For the first nine months, this expense totaled $37.5 million. The company estimates its annual fees to range from $40 million to $50 million, billed according to a tiered schedule based on the total value of the custodied digital assets.

This agreement can only be terminated under a limited set of specific conditions. If BitMine terminates the cooperation without justifiable reason, it must pay Ethereum Tower 85% of all estimated service fees for the remaining contract term.

In addition, after acquiring node operator Pier Two, BitMine separately signed a 10-year management services agreement. The agreement stipulates that Ethereum Tower receives a 2% equity stake in the MAVAN platform and receives profit sharing each month based on the platform’s native staking reward ratio. As of May 31, the company had not accrued expenditures related to this agreement, so the profit-sharing costs have not yet been reflected in the staking business income statement.

BitMine said that the vast majority of Ethereum is staked through MAVAN, and in the long run the staking rewards are sufficient to cover asset custody costs. Looking only at the operational level in this quarter, staking revenue indeed covers sales and administrative expenses excluding changes in the valuation of crypto assets. However, when factoring in the 10-year fixed consulting fee, future profit sharing, and various comprehensive asset management expenses stacked on top of each other, relying solely on staking revenue cannot fully measure the business’s true profitability.

Although BitMine has no debt, its reliance on the capital markets is growing

At the end of May, BitMine’s leverage in its balance-sheet structure was extremely low. It held $340.3 million in cash and $433.1 million in working capital, with no traditional debt. The company’s total assets were $11.63 billion, while total liabilities were only $30.1 million. Most of its assets are digital assets such as Ethereum. Judging from the financial statements, the company does not face an immediate solvency crisis, but in the first nine months, net cash used in operating activities was $287.6 million. The company said that its cash consumption was mainly due to related expenses such as legal, consulting, and investment banking fees arising from the expansion of its Ethereum holdings.

After the quarter ended, BitMine issued another 3.5 million shares of annualized 9.5% perpetual preferred stock, BMNP, raising $273.8 million. This issuance provided short-term liquidity, but it also creates a rigid requirement for an additional $33.25 million in annual preferred dividend payments. This security is equity rather than debt, but its liquidation priority is ahead of common stock, and the high dividend payments continue to absorb the company’s cash flow.

Management believes that, given its existing cash, expected operating cash flow, and on-exchange share issuance instruments, the company can support at least the next 12 months of operations. This judgment holds only if the financing window in the capital markets remains open: if Ethereum’s market stays weak for a long time, the company’s share price will weaken, investors’ willingness to subscribe will decline, financing costs will rise, and operational flexibility will be constrained.

Putting together the latest financial report, BitMine currently faces a set of realities that conflict with each other. On the one hand, the company has built a mature staking business, generating tens of millions of dollars in revenue per quarter that can cover core operating expenses. On the other hand, the large options losses completely absorb staking earnings. Ongoing long-term cooperation contracts continue to increase management costs. The expansion of Ethereum coin hoarding depends entirely on share issuance, and total shares outstanding have increased by more than 100%.

Therefore, BitMine’s long-term economic benefits depend on whether staking revenue can reliably cover various asset management costs and options losses, whether the company can continue to obtain stable equity financing, and whether the price of Ethereum can rebound significantly.

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