BitMine Q3 2026: $46M staking revenue vs. $92M derivatives loss

Original author: Oluwapelumi Adejumo

Chopper

BitMine has significantly expanded its Ethereum holdings, aiming to transform them into a stable source of cash flow, generating nearly $46 million in revenue from staking services last quarter.

However, the $92.1 million in derivative options losses fully offset staking income, compounded by rising asset management costs and the company’s aggressive share issuance, significantly compressing the returns for existing shareholders.

The third-quarter financial results for fiscal year 2026, ending May 31, showed the company’s revenue surging from $2.1 million in the same period last year to $46.5 million; 98% ($45.7 million) of this came from staking and node validation services. BitMine is accelerating its divestment from Bitcoin mining operations and fully transitioning to an Ethereum custody model.

Despite significant revenue growth, the company reported a net loss of $83.6 million this quarter, compared to a modest loss of just $623,000 in the same period last year, with losses sharply expanding.

The primary factor dragging down the company’s performance this quarter was its Ethereum derivatives options trading strategy. BitMine incurred a total loss of $92.1 million on Ethereum-related derivatives this quarter, approximately twice the total revenue generated by its staking business during the same period. Of this, $78.6 million stemmed from net losses on expired options contracts, and $14 million from losses on exercised positions. The $534,000 in gains from open positions only partially offset these losses.

In the same period last year, the company did not engage in any derivatives trading, and the risk exposure in asset management experienced a qualitative leap. In the first nine months of this fiscal year, cumulative derivatives losses amounted to $133.3 million, including $79.3 million in exercise losses and $54.5 million in losses from expired contracts, with only $515,000 in profits from open positions. During the same period, collateralization and validation services generated a combined revenue of just $56.9 million, meaning derivatives losses exceeded collateral revenue by more than double.

BitMine stated that its options strategy primarily involves selling put options, which is part of its overall position management approach. While selling put options generates premium income and allows for accumulating assets at lower prices, a adverse market movement leading to unfavorable exercise of the contracts can result in substantial losses. This significant loss demonstrates that the attempt to enhance returns through options has entirely offset the stable income generated by the node staking business.

Meanwhile, the company’s administrative and general expenses surged from $7.44 million in the same period last year to $37.3 million. Management explained that the increase was primarily due to fees for digital asset custody and asset management services, higher salaries, and increased cash and stock-based compensation for directors.

Before accounting for changes in the valuation of crypto assets, staking income was sufficient to cover the cost of sales and operating expenses for the quarter. Even after deducting multiple non-cash items, the company’s adjusted non-GAAP net loss still reached $70.8 million. This earnings report indicates that the node validation business has generated significant and stable cash flow, but the overall holding trading strategy continues to consume staking profits.

The massive accumulation of Ethereum by BitMine was funded almost entirely through public offerings of common stock, with the full cost borne by existing shareholders. Over the nine months ended May 31, the company sold a cumulative total of 340.7 million shares of BMNR common stock through its at-the-market offering program, raising $11.87 billion net of issuance costs; during the same period, it spent $11.69 billion to purchase Ethereum.

Shareholders' equity has been significantly diluted. The number of outstanding common shares increased by 149% over nine months, rising from 232.4 million as of August 31, 2025, to 579.7 million by the end of May 2026; additional issuances continued after the quarter-end, bringing the total shares outstanding to 603.2 million as of July 9.

Through equity financing, as of May 31, BitMine held a cumulative total of 5.42 million Ethereum tokens at an average cost basis of $19.05 billion; as of writing, this holding has increased to 5.7 million tokens.

Key metrics for BitMine, source: BitMine Tracker

At the end of May, the market value of this Ethereum holding was only $10.86 billion, with a paper loss of approximately $8.2 billion, representing a 43% loss.

This impairment in holdings was the primary source of the company’s $9.04 billion in unrealized losses on digital assets for the first nine months of this fiscal year, during which the company recorded a cumulative net loss of $9.1 billion. The substantial unrealized losses clearly reflect BitMine’s decision to purchase Ethereum at high prices through a stock issuance, with all risks borne by shareholders.

In January of this year, the shareholders' meeting approved increasing the company’s authorized common stock from 500 million shares to 50 billion shares. This authorization does not obligate the company to issue all shares, but provides management with sufficient flexibility to issue additional shares for the acquisition of digital assets and other investments.

BitMine notes that the ability to expand Ethereum holdings heavily depends on continued access to financing channels. A decline in Ethereum prices, weakening company stock performance, and reduced investor interest can increase subsequent financing costs and even limit the company’s ability to issue securities under favorable terms.

The viability of this business model depends not only on staking annual yields and future Ethereum price appreciation, but also on shareholders accepting significant equity dilution, enduring billions of dollars in persistent unrealized losses, and continuously providing capital to support the company’s coin accumulation.

BitMine hedges against price volatility in its holdings through staking operations, but associated long-term cooperative agreements generate fixed fees and revenue-sharing arrangements that continuously compress overall profits. The company entered into a ten-year consulting agreement with third-party service provider Ethereum Tower, incurring $12.8 million in expenses this quarter, accounting for approximately 28% of staking revenue during the period. Cumulative expenses for the first nine months amounted to $37.5 million; the company estimates annual costs to range between $40 million and $50 million, with fees calculated on a tiered basis according to the total value of custodied digital assets.

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

In addition, following BitMine’s acquisition of the node operator Pier Two, a separate ten-year management services agreement was signed. The agreement stipulates that Ethereum Tower will receive 2% equity in the MAVAN platform and will receive monthly revenue shares based on the platform’s native staking reward distribution. As of May 31, the company has not yet accrued expenses related to this agreement, and the share costs have not been reflected in the staking business income statement.

BitMine states that the vast majority of Ethereum is staked through MAVAN, and over the long term, staking rewards are sufficient to cover asset custody costs. Looking solely at this quarter’s operations, staking income indeed covers sales and administrative expenses excluding changes in cryptocurrency asset valuations. However, when combined with a ten-year fixed consulting fee, future revenue sharing, and various asset management expenses, staking income alone cannot fully reflect the true profitability of the business.

At the end of May, BitMine had an extremely low leverage ratio on its balance sheet, with $340.3 million in cash and $433.1 million in working capital, and no traditional debt. The company’s total assets amounted to $11.63 billion, while total liabilities were only $30.1 million, with the vast majority of assets consisting of digital assets such as Ethereum. According to the financial statements, the company does not face an immediate solvency crisis; however, it experienced a cash outflow of $287.6 million from operating activities over the first nine months. The company stated that the cash consumption was primarily due to legal, consulting, and investment banking fees associated with expanding its Ethereum holdings.

Following the end of the quarter, BitMine issued an additional 3.5 million shares of 9.5% annual perpetual preferred stock (BMNP), raising $273.8 million. This offering temporarily boosts liquidity but introduces an annual fixed dividend obligation of $33.25 million. Although this security is classified as equity rather than debt, it has priority over common stock in liquidation, and its high dividend payments continue to consume significant company cash flow.

Management believes that existing cash, expected operating cash flows, and in-market issuance tools are sufficient to support the company’s operations for at least the next 12 months. This assessment assumes continued access to capital markets; if Ethereum prices remain depressed for an extended period, the company’s stock price weakens, or investor demand declines, financing costs could rise and operational flexibility could be constrained.

Based on the latest financial report, BitMine currently faces a set of conflicting realities: on one hand, the company has established a mature staking business that generated tens of millions of dollars in revenue per quarter, sufficient to cover core operational expenses; on the other hand, massive losses from options trading have completely offset staking profits, long-term contractual agreements continue to increase management costs, and Ethereum holdings expansion relies entirely on stock issuance, resulting in a more than twofold increase in total shares outstanding.

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