Tom Lee has quickly bought 5% of ETH, and then what?

Author: KarenZ, Foresight News

What exactly gives ETH long-term value?

On November 8, Ethereum co-founder Vitalik Buterin posted on X, suggesting that rather than emphasizing the transaction fee destruction mechanism, more attention should be paid to ETH's attributes as a value store asset. He believes that the foundation of ETH's long-term value should be based more on the characteristics of Ethereum such as decentralization, censorship resistance, and security.

At the same time that Vitalik was discussing the value logic of ETH, two Ethereum treasury companies sequentially released their latest financial reports.

On November 10, BitMine disclosed a net loss of approximately $6.3 billion for the fiscal year 2026, but its ETH holdings continue to expand, with the latest holdings surpassing 6.07 million coins, only a step away from the goal of holding 5% of the total ETH supply.

The day before, SharpLink announced a net profit of approximately $750 million for the third quarter, of which about $677 million came from unrealized gains on digital assets, and the staking business revenue was approximately $13 million.

Although the statistical periods differ, making direct comparisons of the financial performances of the two companies impossible, both reports reveal a common characteristic of ETH treasury companies: accumulating ETH through capital market financing and generating revenue through staking, while reported profits are highly influenced by ETH price fluctuations.

Vitalik discusses the value basis of ETH itself, but for publicly traded companies like BitMine and SharpLink, another question must also be answered: aside from holding ETH and waiting for its appreciation, how much additional value can they truly create for shareholders?

BitMine: $6.3 billion loss for fiscal year 2026, ETH holdings approaching "5% target"

BitMine's latest financial report looks more like a report card on asset price volatility.

According to the 10-K annual report filed on November 10 for the fiscal year 2026, ending August 31, BitMine achieved total revenue of approximately $125 million for the year, a significant increase from the previous fiscal year's $6.095 million, but net loss reached $6.313 billion, while the previous fiscal year the company had a profit of about $349 million.

It should be noted that the fiscal year 2026 disclosed by BitMine is not a calendar year but runs from September 1, 2025, to August 31, 2026. The company previously used August 31 as the end of its fiscal year but has decided to adjust it to the calendar year starting in 2027, with the period from September to December 2026 being a transition reporting period. Therefore, the $6.3 billion loss disclosed this time does not include financial performance since September of this year and cannot be directly compared with SharpLink's third-quarter profits.

The primary reason for the massive loss is the fair value change of digital assets.

For the fiscal year 2026, BitMine recognized unrealized losses of approximately $6.229 billion on digital assets. Under applicable U.S. accounting standards, eligible crypto assets like ETH are measured at fair value, with price changes directly reflected in the income statement.

As of August 31, BitMine held 5,901,837 ETH, with a total carrying cost of approximately $19.948 billion and a fair value at the end of the period of approximately $14.559 billion. Based on the number of coins held, the average cost is about $3,380 per coin, while the corresponding price at the end of the period is approximately $2,467. The difference amounts to approximately $5.389 billion. This represents the difference between the cumulative cost and fair value of the end-period holdings.

The loss has not stopped BitMine from continuing to accumulate ETH.

According to the latest holding announcement released by the company on November 9, as of November 8, BitMine's ETH holdings have further increased to 6,070,092 coins, accounting for 4.97% of the approximately 122.2 million ETH supply the company has adopted.

This means that the "Alchemy of 5%" target proposed by Tom Lee is nearing completion. The company stated that after approximately 15 months of accumulation, its holdings have reached about 99% of the target scale.

Meanwhile, BitMine also holds 216 BTC, approximately $475 million in cash and securities, and equity investments in Beast Industries, Eightco, and others. Based on the asset prices used in the company announcement, the total value of various crypto assets, cash, securities, and related investments is approximately $14.3 billion.

But with such a large holding of ETH, how will it generate revenue next?

BitMine's answer is staking.

As of November 8, the company has staked approximately 5.227 million ETH, accounting for about 86% of its total ETH holdings. Based on the disclosed average staking yield of 2.65% over nearly the last week and the ETH price at that time, the annualized reward value for this portion of staked assets is estimated at about $309 million.

It should be noted that this is just an annualized projection based on current data and not actual realized annual income.

BitMine is also extending its business to validator node infrastructure through the acquisition of blockchain infrastructure company and staking service provider Pier Two, and the construction of the MAVAN staking platform, hoping to earn staking rewards not only for its own assets but also provide related services to other institutions in the future.

For the fiscal year 2026, the company’s staking and validation business revenue was about $121.4 million, accounting for 97% of total revenue. Meanwhile, general and administrative expenses amounted to $377 million.

This indicates that BitMine has established a revenue source centered around staking, but its current scale of operations is still insufficient to cover overall costs.

Even more noteworthy is that as the "5% target" gradually becomes a reality, the story of simply expanding holdings will also face new challenges: How will the company create sustainable growth in per-share value for shareholders with such a massive ETH reserve?

SharpLink: $750 million net profit in Q3, but how much of that is actually realized?

In contrast to BitMine's massive holdings, SharpLink has chosen a different route: not only to hold ETH but also to improve the earning capacity of these assets as much as possible.

According to the third quarter financial report released on November 9, SharpLink achieved revenue of approximately $13.456 million in the third quarter, a year-on-year increase of 24%; net profit reached $751.4 million, with a diluted earnings per share of $3.45.

However, breaking down this financial report reveals that its profit mainly comes from price and valuation changes of crypto assets.

In the third quarter, SharpLink recognized about $676.7 million in unrealized gains on digital assets, as well as approximately $75.22 million in realized net gains. The two combined account for approximately $752 million, even slightly exceeding the net profit for the quarter.

Of this, unrealized gains accounted for about 90% of net profit. This portion of the gains does not mean the company has actually sold ETH and converted the profit into cash.

It is worth noting that realized gains do not necessarily mean the company has obtained an equal amount of cash through selling ETH. According to SharpLink's financial report, its realized net gain of approximately $75.22 million in the third quarter mainly came from the redemption of liquid staking tokens, conversion between ETH and staking tokens, as well as transactions involving injecting assets into on-chain yield funds, part of which belongs to the accounting profit recognized during the asset conversion process.

If we extend the timeline, SharpLink's financial performance presents a different picture.

Despite earning more than $750 million in the third quarter, the cumulative net loss for the first three quarters of this year is still approximately $328.4 million. Losses from the previous price declines of crypto assets have not been fully offset by the third quarter profits.

Compared to reported profits, SharpLink's operational income scale is much smaller.

In the third quarter, the company's staking revenue was about $13.06 million, a year-on-year increase of 27%, accounting for about 97% of total revenue. Meanwhile, selling, general, and administrative expenses amounted to approximately $11.01 million.

As of September 30, SharpLink held approximately 892,700 ETH and equivalent staked assets, corresponding to a book value of crypto assets of about $2.1 billion. By November 2, its holdings further increased to about 895,100 ETH.

SharpLink has also begun to experiment with more complex asset management strategies.

In the third quarter, the company completed a staking configuration of $200 million in ETH with Lido, holding the corresponding liquid staking asset wstETH. Compared to traditional native staking, liquid staking allows ETH to maintain a degree of liquidity in token form while participating in staking.

In addition, SharpLink has also partnered with Galaxy Digital to launch the Galaxy SharpLink Onchain Yield Fund, with an initial committed funding size of $125 million, of which SharpLink commits $100 million and Galaxy Digital commits $25 million. The fund started deploying funds in the third quarter.

SharpLink CEO Joseph Chalom stated in the financial report that the company hopes to manage ETH as a revenue-generating asset rather than just holding it passively and waiting for prices to rise.

This reflects the difference in strategic focus between the two companies: BitMine is building scale advantages through expanding its holdings and constructing the MAVAN platform, while SharpLink places greater emphasis on improving the efficiency of existing ETH usage.

However, active management is not a free lunch. Liquid staking and other on-chain strategies may introduce additional risks related to smart contracts, liquidity, and fund management. Whether the eventual returns can cover these risks and costs will require longer observation.

Issuing, buying coins, repurchasing: the capital game more important than profits

If one only focuses on the profit numbers in financial reports, one may not truly understand the business model of ETH treasury companies.

For such companies, whether they can continuously obtain funds from capital markets and how to utilize these funds often directly determines the speed at which their assets expand.

BitMine is a typical representative.

In the fiscal year 2026, BitMine cumulatively sold approximately 395.1 million shares of common stock through its ATM (At-the-Market) program, raising a total of approximately $13.2 billion, with net fundraising of about $12.941 billion after deducting issuance costs.

These funds have become an important source for its continued purchase of ETH.

Thus, its business model forms a loop: using stock financing to purchase ETH, expanding asset reserves, then increasing shareholder returns through staking and capital operations.

However, issuing new shares also means that the shareholding percentage of existing shareholders may be diluted.

As of the end of August 2026, approximately 613 million shares of BitMine's common stock were outstanding, whereas only about 232 million shares were outstanding at the end of the previous fiscal year.

Thus, assessing whether these companies have genuinely created shareholder value cannot merely look at how much the total ETH holdings have increased; one must also consider the amount of ETH corresponding to each share and the net asset value.

Assuming a company initially holds 1 million ETH corresponding to 100 million shares of common stock, each share corresponds to 0.01 ETH. If, after issuance, the holdings increase to 1.5 million ETH, but the number of shares increases to 200 million, then each share corresponds to only 0.0075 ETH.

Interestingly, while BitMine is massively issuing new shares, it is also repurchasing stock.

In the fiscal year 2026, BitMine repurchased approximately 20.82 million shares of common stock, with cumulative expenditures of about $354 million. As of the end of August, its remaining stock repurchase authorization was about $3.6 billion.

Issuing and repurchasing appear contradictory, but they actually depend on the pricing of the stock relative to the net asset value.

From a financial logic perspective, when the issue price is higher than the appropriately adjusted per-share net asset value, and the premium is sufficient to cover the costs, issuing more shares may increase the per-share net asset value for existing shareholders; when the stock price is lower than this value, repurchasing and retiring shares at an appropriate price may also increase the asset value corresponding to the remaining shares.

Meanwhile, BitMine has also begun exploring financing methods beyond common stock.

In June 2026, the company issued 3.5 million Series A redeemable preferred shares at an issue price of $80 per share, raising a total of $280 million. These preferred shares have a face value of $100 per share and a cumulative annual dividend rate of 9.5%.

This means BitMine has obtained a new financing channel, but it also needs to bear corresponding dividend obligations. According to the annual report, the annual dividend requirement corresponding to the current issuance scale is approximately $33.3 million.

It is worth noting that the yield generated from staking ETH may not necessarily exceed the financing costs of preferred stock. Although the two cannot be directly compared as equivalent interest spreads, it reminds investors that expanding ETH holdings through financing may not be sufficient to cover capital costs solely with staking revenue.

SharpLink also places emphasis on this issue, utilizing per-share ETH holdings as an important indicator for measuring treasury strategies.

As ETH treasury companies scale up, the market is starting to focus not only on "who bought more ETH" but also "who can finance under more favorable conditions and who can ensure the asset value per share grows."

How will these two treasury companies ultimately make money?

BitMine and SharpLink's latest financial reports actually reveal three potential sources of value for ETH treasury companies.

The first is the price increase of ETH itself. This is the most direct and uncertain factor. Due to holding a large amount of ETH, their net asset value and reported profits are highly impacted by market price fluctuations. An increase in ETH could lead to huge book gains, while a price drop could quickly erode asset value.

The second is staking rewards. Unlike simply holding ETH, treasury companies can continuously earn ETH-denominated staking rewards by participating in Ethereum network validation. However, staking yields are not fixed, and rewards denominated in ETH do not equate to stable profits in dollars. ETH price, operational costs of validation nodes, and related risks all affect the final returns.

The third is capital allocation and asset management capabilities. Through issuing shares, repurchasing, staking, and other asset management strategies, companies have the opportunity to enhance the asset value and earnings level corresponding to each share. However, financing is not without cost; new share issuance may dilute existing shareholders' equity, and more complex on-chain yield strategies may also introduce additional risks.

Meanwhile, these earnings still need to cover companies' day-to-day operations, personnel, technology, financing, and other management costs.

Ultimately, both companies will face the same challenge: beyond bearing ETH price risks, can they continuously create additional value per share through operations and capital allocation?