Key Highlights
- A new $125 million investment fund targeting Ethereum-based DeFi yields is being established by Galaxy Digital and Sharplink.
- The capital structure includes $100M from Sharplink’s staked Ethereum reserves and $25M from Galaxy, which will oversee fund operations.
- Sharplink disclosed a substantial net loss of $685.6 million during Q1 2026, primarily attributed to unrealized depreciation of its Ethereum portfolio.
- Ethereum’s price declined sharply from approximately $3,354 in mid-January to $2,104 at quarter-end in March, with a modest rebound to $2,339.
- Galaxy Digital shares have surged 118.5% year-over-year, prompting Compass Point to increase its price projection to $41.
In a strategic partnership announcement, Galaxy Digital and Sharplink have revealed plans to establish an investment vehicle dedicated to generating returns from Ethereum through decentralized finance protocols. This development comes alongside Sharplink’s disclosure of substantial losses driven by cryptocurrency market volatility.
Sharplink and Galaxy Digital just launched a $125M on-chain yield fund backed by Sharplink’s staked $ETH treasury.
This comes the same day Sharplink reported a $686M Q1 loss, nearly all of it from unrealized ETH losses. pic.twitter.com/hPbWQBjAXr
— Token Metrics (@tokenmetricsinc) May 11, 2026
The partnership involves a non-binding memorandum of understanding to establish the Galaxy Sharplink Onchain Yield Fund. Set to become operational within weeks, the fund will feature $125 million in seed capital. Sharplink’s contribution consists of $100 million sourced from its staked Ethereum reserves, while Galaxy Digital is committing $25 million and assuming the investment management role.
Capital allocation will focus on DeFi liquidity platforms and various blockchain-based yield optimization strategies. The primary objective centers on generating incremental returns from Ethereum positions while maintaining the core asset holdings.
Sharplink’s balance sheet contains over 868,000 ETH tokens. During the market peak last October, this treasury reached a valuation approaching $4 billion. The company initiated its Ethereum accumulation strategy in June 2025 and has generated approximately 18,800 ETH through staking rewards over this period.
Mike Novogratz, CEO of Galaxy, noted that institutional appetite for blockchain-based financial products has matured significantly, with investors now gaining access to yield generation, liquidity solutions, and risk management capabilities comparable to conventional finance.
Joseph Chalom, CEO of Sharplink, characterized the collaboration as a mechanism to enhance treasury value while supporting the development of the decentralized financial infrastructure. Matthew Sheffield, Chief Investment Officer, emphasized that the fund architecture preserves the company’s foundational staked ETH position while delivering enhanced shareholder returns.
Sharplink Discloses $685.6M First Quarter Deficit
Concurrent with the fund announcement, Sharplink revealed a net deficit of $685.6 million for Q1 2026, equivalent to $3.25 per diluted share.
Approximately $506.7 million of this deficit originated from mark-to-market losses on Ethereum holdings. Ether’s value plummeted from roughly $3,354 in mid-January to $2,104 by the end of March, based on CoinMarketCap tracking. At announcement time, it had recovered to approximately $2,339.
Quarterly revenues increased to $12.1 million, representing substantial growth from the $700,000 recorded in the prior year period, fueled by operational business expansion. Cash reserves stood at $16.9 million at quarter close.
Galaxy Digital Shows Resilience Despite Continued Losses
Galaxy Digital similarly released its first-quarter 2026 financial performance. The firm recorded a GAAP net deficit of $216 million, translating to $0.49 per share, predominantly from unrealized digital asset devaluations.
Transaction volumes within Galaxy’s Global Markets segment remained stable compared to the previous quarter, despite industry-wide volume contractions exceeding 25%. Financial analysts from H.C. Wainwright and Rosenblatt maintained Buy recommendations following the earnings release. Compass Point elevated its target price from $40 to $41, highlighting advances in the firm’s high-performance computing initiatives. Goldman Sachs maintained a Neutral stance with a $21 valuation target.
Galaxy’s equity valuation has appreciated 118.5% during the trailing twelve months and stood at $29.01 at announcement time. The company maintains a current ratio of 1.7, indicating liquid assets surpass near-term liabilities.
The fund partnership awaits completion of definitive legal documentation before achieving binding status.
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