SharpLink and Upexi: Each has its own advantages and disadvantages in DAT

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Author: Prathik Desai

Compiled by: Block unicorn

Foreword

I really don't know how I've managed to get through lately. The overwhelming financial reports nearly drowned me. I'm starting to doubt my love for numbers now. It's not because of too much analysis, but because in the six financial analysis reports I've written over the past three weeks, each one revealed some extremely rare information in our company's financial statements.

The financial status of Digital Asset Trusts (DATs) is intricately intertwined with DeFi strategies, making it extremely challenging to analyze the company's financial performance.

Upexi and SharpLink Gaming announced their quarterly financial reports this week, and they are the companies I have recently conducted in-depth research on regarding their financial status.

On the surface, they seem like ordinary businesses: one selling consumer brands, the other engaging in affiliate marketing for sports betting. But it is only after a deeper understanding that one realizes what truly affects their valuation, determines their profitability, and shapes their overall image is not the warehouses or e-commerce platforms, but cryptocurrency.

Upexi and SharpLink have entered a realm that blurs the lines between corporate financing and cryptocurrency fund management.

In today's article, I will take you through the interesting aspects I found in the Ethereum and Solana vaults, as well as the things investors need to pay attention to before accessing cryptocurrencies through these avenues.

SharpLink's ETH department

Less than a year ago, I would have described SharpLink as a niche sports league marketing company, the kind of company that only comes to mind during the Super Bowl. Its financial situation looked no different from that of other mid-sized peers: meager revenues, performance affected by the seasonal fluctuations of the sports event calendar, and a profit and loss statement that frequently showed losses.

There is no indication that the company has a $3 billion balance sheet.

Everything changed in June 2025, when the company reshaped its image with a decision: to designate Ethereum as its main treasury asset and become one of the leading enterprises holding ETH.

After that, the company reorganized its Ethereum management business, led by Joe Lubin (Joe Lubin). The Ethereum co-founder and founder and CEO of Consensys joined SharpLink at the end of May as chairman of the board.

In the past few months, SharpLink has directly invested funds into native staking, liquid staking, and DeFi protocols, shifting its business focus to Ethereum. Three months later, this transformation has begun to show results.

SharpLink reported quarterly revenues of $10.8 million, an 11-fold increase compared to $900,000 in the same period last year. Of this, $10.2 million came from staking income from its ETH treasury, while only $600,000 came from its traditional affiliate marketing business.

SharpLink's total assets grew from $2.6 million on December 31, 2024, to $3 billion on September 30, 2025.

At the end of the quarter, Sharplink held 817,747 ETH, which increased to 861,251 ETH by early November. Now, it is the second largest company holding ETH. Its revenue grew 11 times, entirely thanks to this part of the treasury.

In this quarter, nearly 95% of SharpLink's revenue came from the earnings generated by its ETH staking. Although its net profit skyrocketed 100 times to $104.3 million, while it recorded a net loss of $900,000 in the third quarter of 2024, there is a hidden issue within this. Like most other DAT projects, all of SharpLink's profits come from the unrealized gains of the ETH it holds.

This is because the Generally Accepted Accounting Principles (GAAP) in the United States require companies to value assets at market fair value at the end of the accounting period. The contribution of affiliated companies to profits is minimal.

Therefore, all these unrealized gains are essentially non-cash. Even the income that SharpLink receives from staking rewards is paid in ETH, rather than being periodically exchanged for fiat currency. This is exactly where my concern lies.

Although non-cash income is still considered revenue in accounting, the company consumed $8.2 million in operating cash over nine months to pay for salaries, legal and audit fees, and server costs.

So where did these dollars come from?

Like most other DATs, SharpLink funds its ETH buybacks by issuing new shares. The company raised $2.9 billion through equity issuance this year, and subsequently authorized a $1.5 billion share repurchase to offset equity dilution.

This is exactly a replica of the DeFi flywheel effect, which is becoming increasingly common in DAT.

SharpLink issues stocks and uses the proceeds to purchase ETH. It stakes ETH to earn returns, records unrealized gains as ETH prices rise, and reports higher accounting profits, enabling it to issue more stocks. This cycle continues.

As I mentioned in other DAT cases, the model works well during bullish cycles. Even after experiencing several bearish cycles, as long as the company's cash reserves are sufficient to sustain cash expenditures, the model can operate normally. The increase in ETH prices will enhance the balance sheet, the growth rate of the treasury's value will exceed operating costs, and the market will also gain a publicly traded Ethereum proxy with good liquidity and yield enhancement.

When prices consolidate sideways for a long time (which is not new for Ethereum holders), this vulnerability becomes apparent, especially with high corporate costs.

We have also seen similar risks in the case of the Bitcoin fund management giant Strategy.

I expect that almost all DAT projects will face these risks, regardless of which cryptocurrency they invest in, unless they have substantial cash reserves and healthy profitability to support their DAT projects. However, we rarely see profitable companies fully committing to the cryptocurrency space.

We see that this is the case when Strategy chases BTC while SharpLink bets on ETH. The situation with the Solana vault is also quite similar.

Upexi's Solana Factory

SharpLink has almost completely transformed from a gambling affiliate company into an Ethereum treasury, while Upexi, even though it still retains the old shell of a consumer brand company, has embraced Solana.

I have been following Upexi for a while. From an operational perspective, their performance has been mostly positive over the past five fiscal years. Brand acquisitions and revenue growth have both performed well, and the gross margin is also satisfactory. However, from a corporate perspective, Upexi has reported net losses over the past four fiscal years.

Perhaps it is this point that has prompted the company to include digital assets in its financial statements. In the past two quarters, this change, although not significant, is still noticeable. In this quarter, digital assets have dominated the company's financial statements.

In the third quarter of 2025, Upexi generated revenue of $9.2 million, of which $6.1 million came from SOL staking, and the remaining $3.1 million came from its consumer brand business. For a consumer goods company that had zero revenue from cryptocurrency business in the previous quarter, the fact that two-thirds of its revenue comes from digital asset staking is undoubtedly a significant leap.

Upexi currently holds 2.07 million SOL tokens, worth over 400 million dollars, of which about 95% have been staked. Just in this quarter, they have earned a reward of 31,347 SOL tokens through staking.

The biggest difference between Upexi and other DAT is its strategy for acquiring locked SOL.

The company purchased approximately 1.05 million locked SOL at an average market discount price of 14%, with unlocking periods ranging from 2026 to 2028.

The locked tokens cannot be sold at the moment, so the trading price is relatively low. As these locked SOL tokens are unlocked, their value will naturally rise to the same level as normal SOL tokens, allowing Upexi to earn staking rewards while also benefiting from the built-in price appreciation of these SOL tokens.

This approach resembles that of a hedge fund, rather than a typical DAT. However, when you look at Upexi's cash flow, the same concerns arise - just like with SharpLink.

This strategy typically appears in hedge funds rather than in ordinary DATs (Digital Asset Treasuries). However, when you examine Upexi's cash flow, you will find the same issues as with SharpLink.

Despite Upexi reporting a net profit of $66.7 million, with unrealized gains of $78 million, the company still recorded an operating cash outflow of $9.8 million. Since the income from staking SOL has not been converted into fiat currency, it remains classified as non-cash income. Therefore, the company has taken other measures typically adopted by DAT focused on capital reserves: financing.

Upexi raised $200 million through convertible bonds and secured a $500 million equity financing facility. Its short-term debt increased from $20 million to $50 million.

The same flywheel, but the risks are similar. What will happen if SOL cools down for a year?

SharpLink and Upexi are both creating some clever products. But that doesn't mean they can sustain their growth.

There is no simple answer.

There is a pattern here that I cannot ignore: both companies are operating financial systems that are logical when the economic situation is favorable. They have both established vaults that can expand with network activity; they have both developed revenue structures that can supplement income sources; and through these initiatives, they have become two of the most important Layer-1 blockchain public agents in the world.

However, almost all of the profits of these two companies come from unrealized gains, and the earned token income lacks liquidity, showing no signs of systematically converting cash reserves into confirmed profits. Reports indicate that operating cash is negative, and they rely on capital markets to pay their bills.

Rather than being a criticism, this is more of a reality and trade-off that every company adopting the DAT architecture must face.

In order for this model to be sustained, one of the following two scenarios must occur: either staking must truly become a cash engine for enterprises, continuously providing funds for the purchase of digital assets; or enterprises must incorporate the planned sale of digital assets into their digital asset strategy to achieve systematic profits.

This is not impossible. Sharplink earned $10.3 million by staking ETH, while Upexi earned $6.08 million by staking SOL.

These amounts are not insignificant. Even if part of it is reinvested into the fiat currency system to support operations, the final outcome may change.

Before this, both Upexi and Sharplink faced the same dilemma: balancing extraordinary innovation with liquidity in the capital markets.

That's it for today, see you in the next article.

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