Staking ETH Securely Earns $46 Million — Why Is BitMine Still Plunging into Massive Losses?

Original Author: Oluwapelumi Adejumo

Original Translation: Chopper

BitMine is aggressively building its Ethereum holdings, attempting to transform them into a stable source of cash flow, with its staking business generating nearly $46 million in revenue last quarter. 

However, a $92.1 million loss from derivatives options completely offset the staking gains. Combined with rising asset management costs and the company's aggressive share issuance, the profit margins for existing shareholders have been significantly compressed.

According to its fiscal Q3 2026 earnings report for the period ending May 31, the company's revenue surged to $46.5 million from $2.1 million in the same period last year; 98% of this ($45.7 million) came from staking and node validation services. BitMine is accelerating its divestment from Bitcoin mining, fully pivoting towards an Ethereum treasury model.

Despite the substantial revenue growth, the company reported a net loss of $83.6 million for the quarter, a sharp escalation from a minor loss of just $623,000 in the same period last year.

Massive Options Loss Erases All Ethereum Staking Revenue

The core factor dragging down this quarter's performance was the company's Ethereum derivatives options trading strategy. BitMine's Ethereum-related derivatives recorded a total loss of $92.1 million for the quarter, roughly double the total revenue from its staking business during the same period. Of this, $78.6 million came from net losses on expired option contracts, and $14 million from losses on exercised positions. A $534,000 gain from open contracts only slightly offset the losses.

The company did not engage in any derivatives trading in the same period last year, marking a qualitative leap in the risk exposure of its asset management operations. Over the first nine months of the current fiscal year, cumulative derivatives losses reached $133.3 million, comprising $79.3 million in losses from exercised positions and $54.5 million from expired contracts, with a mere $515,000 gain from open contracts. During the same period, revenue from staking and validation services totaled only $56.9 million, meaning derivatives losses more than doubled staking income.

BitMine stated that its options strategy primarily involves selling put options as part of its overall portfolio management. While selling puts generates premium income and allows for asset accumulation at lower prices, adverse market movements leading to contract exercises under unfavorable conditions can result in significant losses. This large loss demonstrates that the attempt to enhance returns through options has completely negated the stable income generated by its node staking operations.

Concurrently, the company's selling, general, and administrative (SG&A) expenses skyrocketed from $744,000 in the same quarter last year to $37.3 million. Management attributed this surge mainly to increased fees for digital asset custody and management services, salary adjustments, and higher director compensation in the form of cash and stock.

Before accounting for changes in crypto asset valuations, staking revenue was sufficient to cover the cost of sales and SG&A expenses for the quarter. Even after excluding various non-cash items, the company's own adjusted non-GAAP net loss still stood at $70.8 million. This earnings report indicates that while the node validation business has generated substantial stable cash flow, the overall portfolio trading strategy continues to consume staking profits.

Continuous Issuance of BMNR Shares to Hoard Ethereum Significantly Dilutes Shareholder Equity

BitMine's massive Ethereum accumulation is almost entirely funded by issuing common shares on the open market, with the cost borne entirely by existing shareholders. In the nine months ending May 31, the company sold approximately 340.7 million shares of BMNR common stock through at-the-market (ATM) offerings, raising $11.87 billion after deducting issuance costs. During the same period, it spent $11.69 billion purchasing Ethereum.

Shareholder equity has been heavily diluted. The number of outstanding common shares increased by 149% over nine months, from 232.4 million shares on August 31, 2025, to 579.7 million at the end of May 2026. Issuance continued after the quarter's end, with total shares outstanding reaching 603.2 million by July 9.

Fueled by equity financing, BitMine held a total of 5.42 million ETH as of May 31, at an aggregate cost of $19.05 billion. At the time of writing, its holdings have increased to 5.7 million ETH.

Key Metrics for BitMine, Source: BitMine Tracker

The market value of this Ethereum stash at the end of May was only $10.86 billion, resulting in a paper loss of approximately $8.2 billion, or a decline of 43%.

This impairment on holdings was the primary contributor to the company's $9.04 billion unrealized loss on digital assets for the first nine months of the fiscal year, during which the company recorded a cumulative net loss of $9.1 billion. The massive paper loss vividly illustrates BitMine's strategy of issuing shares to buy Ethereum at high prices, with all the risk ultimately falling on shareholders.

In January this year, a shareholder meeting approved increasing the company's authorized common stock limit from 500 million shares to 50 billion shares. This authorization does not mandate full issuance but provides management ample room to continue issuing shares for purchasing digital assets and other investments.

BitMine cautioned that its ability to expand its Ethereum holdings is highly dependent on maintaining continuous access to financing channels. A decline in Ethereum's price, a weakening stock price, or waning investor appetite for its offerings would increase subsequent financing costs and could even limit the company's ability to issue securities on favorable terms.

The support pillars for this business model extend beyond staking annual percentage yields (APY) and future price appreciation of Ethereum. It also requires shareholders to accept significant equity dilution and the company holding billions in paper losses year after year, continuously providing capital for its coin accumulation strategy.

Long-Term Service Contracts Inflate Staking Operating Costs, Squeezing Profit Margins

BitMine relies on its staking business to hedge against price fluctuations in its holdings, but the associated long-term service agreements generate fixed fees and profit-sharing obligations that continuously compress overall profitability. The company has a ten-year consulting agreement with a third-party service provider, Ethereum Tower. It recorded an expense of $12.8 million related to this agreement for the quarter, representing approximately 28% of its total staking revenue for the period. Total expenses under this agreement for the first nine months amounted to $37.5 million. The company estimates annual fees to be in the range of $40 million to $50 million, calculated based on a tiered fee schedule linked to the total value of digital assets under custody.

This agreement can only be terminated under specific, limited conditions. If BitMine terminates the agreement without cause, it must pay Ethereum Tower 85% of the total estimated service fees for the remaining contract period.

Furthermore, after acquiring node operator Pier Two, BitMine entered into a separate ten-year management services agreement. This agreement stipulates that Ethereum Tower receives a 2% equity stake in the MAVAN platform and a monthly fee calculated as a percentage of the platform's native staking rewards. As of May 31, the company had not yet accrued expenses related to this agreement, and the profit-sharing costs have not yet been reflected in the staking business's income statement.

BitMine states that the vast majority of its Ethereum is staked through MAVAN, and in the long term, staking rewards should be sufficient to cover asset custody costs. On an operational level for this quarter alone, staking revenue did indeed cover selling and administrative expenses, excluding changes in crypto asset valuations. However, when factoring in the ten-year fixed consulting fee, future profit-sharing, and various other asset management expenses, relying solely on staking revenue does not provide a complete picture of the business's true profitability.

While Debt-Free, BitMine's Dependence on Capital Markets is Deepening

As of the end of May, BitMine's balance sheet showed very low leverage, with $340.3 million in cash, $433.1 million in working capital, and no traditional debt. The company's total assets stood at $11.63 billion against total liabilities of just $30.1 million, with the vast majority of assets being digital assets like Ethereum. While the financial statements do not indicate an immediate solvency crisis, operating cash flow for the first nine months was negative $287.6 million. The company attributed this cash burn primarily to legal, consulting, investment banking, and fundraising expenses related to expanding its Ethereum holdings.

After the quarter ended, BitMine issued an additional 3.5 million shares of 9.5% perpetual preferred stock (BMNP), raising $273.8 million. While this issuance provides a short-term liquidity boost, it also introduces a fixed annual dividend expense of $33.25 million. Although this security is classified as equity rather than debt, its claim on assets ranks above common stock, and the high dividend yield will continue to consume company cash flow.

Management believes that its existing cash, expected operating cash flow, and at-the-market (ATM) issuance programs are sufficient to support the company's operations for at least the next 12 months. However, this assessment hinges on the capital markets remaining accessible. Prolonged weakness in Ethereum's price, a decline in the company's stock price, or reduced investor appetite for its offerings would increase the company's cost of capital and limit its operational flexibility.

Considering the latest financial report, BitMine currently presents a set of conflicting realities: On one hand, the company has established a mature staking business generating tens of millions in quarterly revenue, capable of covering core operating expenses. On the other hand, significant options losses have completely absorbed staking profits, long-term contracts are continuously driving up management costs, and the expansion of its Ethereum treasury is funded entirely through share issuance, more than doubling the total share count.

Therefore, BitMine's long-term economic viability depends on whether staking income can consistently cover various asset management costs and options losses, whether the company can continue to secure equity financing stably, and whether the price of Ethereum can recover significantly.