Key Highlights
- A new $125 million fund is being established by Galaxy Digital and Sharplink to generate returns through Ethereum DeFi strategies.
- The partnership allocates $100M from Sharplink’s staked ETH treasury and $25M from Galaxy, which will oversee fund management.
- Sharplink disclosed a substantial net loss of $685.6 million during Q1 2026, primarily attributed to unrealized losses from ETH holdings.
- Ethereum’s price declined from approximately $3,354 in mid-January to $2,104 by March’s end, later rebounding modestly to $2,339.
- Galaxy Digital’s shares have surged 118.5% year-over-year, with Compass Point upgrading its target price to $41.
In a strategic collaboration, Galaxy Digital and Sharplink have unveiled plans for a new investment vehicle designed to leverage Ethereum assets within the decentralized finance ecosystem, coinciding with Sharplink’s disclosure of substantial quarterly losses linked to cryptocurrency market downturns.
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 preliminary agreement to establish the Galaxy Sharplink Onchain Yield Fund, set to debut within weeks with an initial capital commitment totaling $125 million. Sharplink will allocate $100 million from its staked Ethereum reserves, while Galaxy Digital will contribute $25 million and assume responsibility for investment management operations.
The fund’s strategy centers on deploying capital across DeFi liquidity platforms and various blockchain-based yield generation mechanisms. This approach aims to produce supplementary returns from Ethereum positions while maintaining the underlying asset holdings.
Sharplink currently maintains a treasury exceeding 868,000 ETH. During October’s market peak, this portfolio reached a valuation approaching $4 billion. The company has systematically accumulated its Ethereum position since June 2025, generating approximately 18,800 ETH through staking rewards during this period.
Mike Novogratz, CEO of Galaxy, noted that institutional appetite for blockchain-based products has expanded significantly, enabling investors to access yield opportunities, liquidity solutions, and risk management instruments comparable to conventional financial markets.
Joseph Chalom, Sharplink’s CEO, explained that this collaboration aims to enhance the company’s treasury performance while supporting the development of the broader blockchain financial infrastructure. Matthew Sheffield, the Chief Investment Officer, emphasized that the fund structure preserves the company’s fundamental staked ETH position while creating additional shareholder value.
Sharplink Records $685.6M First Quarter Deficit
Alongside 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 shortfall stemmed from unrealized depreciation on its Ether portfolio. Ethereum’s value plummeted from roughly $3,354 in mid-January to $2,104 by the end of March, based on CoinMarketCap tracking. At the announcement date, it was valued near $2,339.
Quarterly revenue increased to $12.1 million from $700,000 in the prior year period, reflecting expansion in operational activities. The company maintained $16.9 million in cash reserves at quarter-end.
Galaxy Digital Shows Resilience Despite Red Ink
Galaxy Digital simultaneously 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 depreciation on digital currency positions.
Transaction volumes in Galaxy’s Global Markets segment remained consistent 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 report. Compass Point elevated its price target from $40 to $41, highlighting advancement in the company’s high-performance computing initiatives. Goldman Sachs retained a Neutral stance with a $21 valuation target.
Galaxy’s equity has appreciated 118.5% over the trailing twelve months, trading at $29.01 when the announcement was made. The company demonstrates a current ratio of 1.7, indicating liquid assets surpass near-term liabilities.
The fund partnership awaits finalization of binding documentation before becoming effective.
