Tom Lee is on the verge of buying up 5% of all ETH in circulation. What happens next?

Written by KarenZ, Foresight News

What is the fundamental basis for ETH's long-term value?

On November 8, Ethereum co-founder Vitalik Buterin posted on X that instead of overemphasizing the transaction fee burn mechanism, the community should focus more on ETH's properties as a store-of-value asset. He argued that ETH's long-term value foundation should rest primarily on Ethereum's core traits: decentralization, censorship resistance, and security.

Right as Vitalik was discussing the value proposition of ETH, two leading Ethereum treasury companies released their latest financial reports in quick succession.

On November 10, BitMine reported a net loss of roughly $6.3 billion for fiscal year 2026, yet it continued to expand its ETH holdings, which now exceed 6.07 million ETH — just a stone's throw away from its goal of holding 5% of ETH's total circulating supply.

The day prior, SharpLink announced Q3 net profit of approximately $750 million, of which roughly $677 million came from unrealized gains on digital assets, with staking revenue contributing around $13 million.

While the two companies' fiscal reporting periods differ, making direct comparisons of their profit and loss performance invalid, both reports reveal a core shared trait of ETH treasury firms: they raise capital in public markets to accumulate ETH, generate yield through staking, and their reported book profits are highly sensitive to ETH price volatility.

Vitalik's discussion centers on the intrinsic value of ETH itself, but for publicly traded companies like BitMine and SharpLink, a critical remaining question is: beyond passively holding ETH and waiting for price appreciation, how much tangible additional value can they create for their shareholders?

BitMine: $6.3 Billion Net Loss in FY2026 as ETH Holdings Near the "5% Supply Target"

BitMine's latest earnings read less like a traditional business performance report, and more like a scorecard marking the impact of asset price swings.

According to the 2026 fiscal year 10-K annual report filed on November 10, for the fiscal year ending August 31, BitMine generated total revenue of roughly $125 million — a sharp jump from the $6.095 million in revenue in the prior fiscal year — but posted a net loss of $6.313 billion, compared to net income of approximately $349 million in the prior year.

It is important to note that BitMine's reported 2026 fiscal year does not align with the calendar year: it covers the period from September 1, 2025 to August 31, 2026. The company has historically used an August 31 fiscal year-end, but has decided to shift to a calendar year reporting structure starting in 2027, with the period from September to December 2026 serving as a transition reporting window. As such, the reported $6.3 billion loss does not reflect financial performance from September onwards of this calendar year, and cannot be directly compared to SharpLink's Q3 results.

The primary driver of this massive loss was the change in fair value of the company's digital asset holdings.

For FY2026, BitMine recognized approximately $6.229 billion in unrealized losses on its digital assets. Under applicable U.S. accounting standards, eligible crypto assets such as ETH are measured at fair value, with price fluctuations directly reflected on the income statement.

As of August 31, BitMine held 5,901,837 ETH, with a total book cost of approximately $19.948 billion and an ending fair value of roughly $14.559 billion. On a per-unit basis, this translates to an average cost of $3,380 per ETH, compared to an ending ETH price of $2,467, creating a gap of about $5.389 billion between cumulative cost and fair value of the period-end holdings.

The reported loss has not slowed BitMine's pace of ETH accumulation.

According to the latest holdings disclosure published by the company on November 9, as of November 8, BitMine's ETH holdings have grown further to 6,070,092 ETH, accounting for 4.97% of the total ETH supply of 122.2 million tokens used in the company's calculations.

This means the "Alchemy of 5%" target championed by Tom Lee is nearly achieved. The company noted that after roughly 15 months of accumulation, its holdings have reached 99% of the targeted size.

Alongside its ETH holdings, BitMine also holds 216 BTC, approximately $475 million in cash and marketable securities, plus equity investments in firms including Beast Industries and Eightco. Based on asset price assumptions used in the company's disclosures, the total value of its crypto assets, cash, marketable securities, and related investments comes to roughly $14.3 billion.

But holding such a massive ETH reserve raises the next critical question: how will the company generate returns from this position going forward?

BitMine's answer: staking.

As of November 8, the company has staked approximately 5.227 million ETH, representing 86% of its total ETH holdings. Based on the disclosed 7-day average staking yield of 2.65% and the prevailing ETH price at the time of measurement, the annualized staking reward value on this staked position is estimated to be around $309 million.

It is important to note that this is an annualized estimate based on real-time data at the time of measurement, rather than actual realized annual revenue.

BitMine has also expanded into validator node infrastructure through its acquisition of Pier Two, a blockchain infrastructure and staking services provider, and the development of its MAVAN staking platform. The company aims to not only earn staking rewards on its own asset holdings in the future, but also offer related staking services to other institutional clients.

For FY2026, the company generated roughly $121.4 million in staking and validation services revenue, accounting for 97% of total revenue. Over the same period, general and administrative expenses reached $377 million.

This shows that while BitMine has built a staking-centered revenue stream, its current operating scale is not yet sufficient to cover its total operating costs.

More notably, as the "5% supply target" draws closer to completion, the narrative of simply expanding ETH holdings will face a new test: how will the company turn its massive ETH reserve into sustained, growing per-share value for shareholders?

SharpLink: $750 Million in Q3 Net Profit — But How Much of That Is Actual Realized Gain?

Compared to BitMine's large-scale accumulation approach, SharpLink has chosen a different path: beyond holding ETH, the company seeks to maximize the yield-generating capacity of its asset base.

According to the Q3 earnings report released on November 9, SharpLink generated $13.456 million in Q3 revenue, representing 24% year-over-year growth, with net profit reaching $751.4 million and diluted earnings per share of $3.45.

However, a deep dive into the report reveals that the bulk of this profit is driven by crypto asset price movements and valuation changes.

In Q3, SharpLink recognized approximately $676.7 million in unrealized gains on digital assets, plus $75.22 million in net realized gains. Combined, these two items total $752 million — slightly higher than the quarter's reported net profit.

Of the total profit, unrealized gains account for roughly 90%. These gains do not represent actual cash generated from selling ETH positions.

It is also worth noting that the reported realized gains do not all come from cash proceeds of selling ETH. According to SharpLink's financials, the $75.22 million in Q3 net realized gains comes primarily from transactions including liquid staking token redemptions, conversions between ETH and staking tokens, and capital injections into on-chain yield funds — a portion of these gains are accounting profits recognized during the asset conversion process, rather than cash generated from trading.

Looking at performance over a longer time horizon, SharpLink's financial picture is far more mixed.

Despite reporting more than $750 million in Q3 profit, the company still posted a cumulative net loss of $328.4 million for the first three quarters of the year. The losses from earlier crypto price declines have not been fully offset by the Q3 profit.

Compared to its headline book profit, SharpLink's actual operating revenue is far smaller in scale.

In Q3, the company generated $13.06 million in staking revenue, up 27% year-over-year and accounting for 97% of total revenue, while selling, general and administrative expenses reached $11.01 million over the same period.

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

SharpLink has also begun experimenting with more sophisticated asset management strategies.

In Q3, the company completed a $200 million ETH allocation to Lido staking, holding the corresponding liquid staking asset wstETH. Compared to traditional native staking, liquid staking allows ETH to remain staked for network validation, while maintaining partial liquidity via the token representation.

In addition, SharpLink partnered with Galaxy Digital to launch the Galaxy SharpLink Onchain Yield Fund, with an initial committed capital of $125 million: $100 million committed by SharpLink and $25 million committed by Galaxy Digital. The fund began deploying capital in Q3.

SharpLink CEO Joseph Chalom stated in the earnings release that the company aims to manage ETH as a yield-generating asset, rather than passively holding the asset and waiting for price appreciation.

This reflects a core difference in strategic focus between the two firms: BitMine is building scale advantages through expanded holdings and the development of its MAVAN platform, while SharpLink prioritizes improving the capital efficiency of its existing ETH position.

However, active management does not come for free. Liquid staking and other on-chain strategies introduce additional risks, including smart contract risk, liquidity risk, and fund management risk. Whether the eventual returns can offset these risks and associated costs will require longer-term observation.

Share Issuances, Crypto Purchases, Buybacks: The Capital Game That Matters More Than Reported Profits

Focusing solely on reported profit numbers would lead to a superficial understanding of the business model of ETH treasury companies.

For this category of firms, the ability to continuously raise capital in public markets, and the manner in which that capital is deployed, often directly determines the pace of their asset expansion.

BitMine serves as a prime example of this dynamic.

For FY2026, BitMine sold a cumulative 395.1 million common shares through its At-the-Market (ATM) equity program, raising $13.2 billion in gross proceeds, with net proceeds of $12.941 billion after deducting issuance costs.

These funds have been the core source of capital for the company's ongoing ETH purchases.

This creates a self-reinforcing business loop: raise capital via equity issuance to buy ETH, expand the asset reserve, then deploy staking returns and capital operations to drive higher shareholder returns.

However, repeated share issuances also carry the risk of diluting existing shareholders' ownership stakes.

As of the end of August 2026, BitMine had 613 million common shares outstanding, compared to just 232 million common shares outstanding at the end of the prior fiscal year.

As such, evaluating whether these companies are truly creating shareholder value cannot rely solely on the growth of total ETH holdings; investors must also track per-share ETH holdings and net asset value per share.

Consider a simple example: a company that initially holds 1 million ETH, with 100 million common shares outstanding, equivalent to 0.01 ETH per share. If the company issues new shares to grow its holdings to 1.5 million ETH, but total shares outstanding rise to 200 million, the ETH per share actually falls to 0.0075 ETH.

Notably, even as BitMine conducts large-scale share issuances, it is also repurchasing its own shares.

For FY2026, BitMine repurchased 20.82 million common shares, spending a cumulative $354 million. As of the end of August, the remaining authorized share repurchase capacity stood at roughly $3.6 billion.

Issuing new shares and repurchasing existing shares may appear contradictory, but the strategy depends on the market price of the stock relative to its net asset value.

From a financial logic perspective, when the issuance price exceeds appropriately adjusted net asset value per share, and the premium is sufficient to cover issuance costs, share issuances can increase the net asset value per share for existing shareholders. When the stock trades below this net asset value, repurchasing and retiring shares at an appropriate price can also increase the asset value per remaining outstanding share.

In parallel, BitMine has begun exploring financing channels beyond common equity.

In June 2026, the company issued 3.5 million Series A redeemable preferred shares at an issue price of $80 per share, raising $280 million in gross proceeds. These preferred shares have a par value of $100 per share, with a cumulative annual dividend yield of 9.5%.

This means BitMine has gained access to a new financing channel, but also must carry the corresponding dividend obligations. According to the annual report, the current issuance scale translates to an annual dividend requirement of approximately $33.3 million.

It is worth noting that the staking yield generated from the company's ETH holdings is not necessarily higher than the cost of preferred share financing. While the two metrics cannot be directly compared as like-for-like spreads, this dynamic serves as a reminder to investors: expanding ETH holdings via financing may not generate enough staking revenue alone to cover the cost of capital.

SharpLink also prioritizes this metric, tracking per-share ETH holdings as a key indicator of the success of its treasury strategy.

As ETH treasury companies scale up, the market focus is shifting beyond simply tracking "who bought more ETH" to evaluating "who can raise capital on more favorable terms, and who can grow the asset value per outstanding share".

What Will Ultimately Drive Profitability for These Two Treasury Firms?

The latest earnings reports from BitMine and SharpLink actually reveal three potential sources of value for ETH treasury companies.

First is price appreciation of ETH itself. This is the most direct, yet also most uncertain, source of value. Because these firms hold large ETH positions, their net asset value and reported profits are highly sensitive to market price swings. Rising ETH prices can generate massive book gains, while falling prices can rapidly erode asset value.

The second source is staking revenue. Unlike passively holding ETH, treasury companies can continuously earn ETH-denominated staking rewards by participating in Ethereum network validation. However, staking yields are not fixed, and ETH-denominated rewards do not translate to stable USD profits. ETH price movements, validator node operating costs, and associated risks all impact final returns.

The third source is capital allocation and asset management capability. Through share issuances, buybacks, staking, and other asset management strategies, companies have the opportunity to grow per-share asset value and yield levels. However, capital raising is not free: share issuances can dilute existing shareholder equity, and more complex on-chain yield strategies can introduce additional risks.

At the same time, all of these revenue streams must be sufficient to cover the companies' daily operating costs, personnel expenses, technology investments, financing costs, and other administrative expenses.

Ultimately, both companies face the same core test: beyond taking on ETH price exposure, can they deliver sustained, incremental per-share value through operations and smart capital allocation?