Insiders ranked by realized 90-day signed return on their open-market trades at Btcs Inc.. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.20pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Real-time Form 4 intelligence. Smarter insider tracking.
Net-tone change vs last year's 10-K.
MD&A
+0.17pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
impair+10
disruptions+8
liquidation+5
unfavorable+5
liquidations+5
Positive rising
profitability+3
opportunities+3
improve+3
attractiveness+2
profitably+1
Risk Factors (Item 1A)
7,931 words
ITEM 1A. RISK FACTORS
The following risk factors should be considered, together with all other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes thereto. The risks described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations, cash flows, and prospects. If any of the risks described below occur, our business, financial condition, results of operations, cash flows, and prospects could be materially adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. The principal risks we face include, among others, the following:
Our business model is evolving and depends on our ability to operate and scale blockchain infrastructure and DeFi activities efficiently and profitably.
Our operating results, liquidity, and financial condition are materially impacted by the price of Ethereum (“ETH”) and other digital assets.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impair+10
losses+9
disruptions+8
liquidation+8
adversely+6
Positive rising
opportunities+7
improve+6
reward+5
profitability+4
enhance+3
MD&A (Item 7)
15,176 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Risk Factors and elsewhere in this report. When we refer to “Fiscal 2025” and “Fiscal 2024”, we are referring to the years ended December 31, 2025 and December 31, 2024, respectively.
Company Overview
Executive Overview
BTCS Inc. is a blockchain technology company focused on revenue generation through blockchain infrastructure and decentralized finance (“DeFi”) activities, primarily on the Ethereum network. During 2025, the Company continued to execute a strategic repositioning toward Ethereum-native operations designed to generate recurring on-chain revenues, improve capital efficiency, and actively deploy digital assets in support of long-term growth.
The Company’s business model is centered on participating directly in core components of the Ethereum ecosystem, including validator node operations as a validator (“Validator”), block-building activities as a block builder (“Builder”), and DeFi asset deployment. While BTCS holds significant Ethereum (“ETH”) assets, they are primarily maintained as operating assets that support the Company’s revenue-generating activities, infrastructure participation, and DeFi activities.
Our operations depend on the continued adoption, functionality, and economics of the Ethereum network and related protocols, and changes to protocol rules, market structure, or participant behavior could materially adversely affect us.
Our block-building operations depend on highly competitive transaction execution markets, including proposer-builder separation (“PBS”), MEV relay ecosystems, and access to transaction flow, and changes in these markets could materially adversely affect our results.
Our DeFi activities, including ETH-backed borrowing and liquidity deployment, expose us to smart contract risks, protocol governance risks, liquidity risks, and potential liquidation events that could result in significant losses.
We rely on third-party infrastructure providers, decentralized protocols, and other ecosystem participants, and disruptions, failures, or regulatory actions affecting these third parties could materially adversely affect our business.
Our operations depend on access to banking services and financial infrastructure, and disruptions to these relationships could materially adversely affect our business.
The regulatory landscape for digital assets, blockchain infrastructure, DeFi, and related activities is rapidly evolving, and regulatory developments or enforcement actions could materially adversely affect our business.
We may be subject to cybersecurity incidents, digital asset theft, loss of private keys, and other security risks, and we do not maintain insurance covering losses of digital assets.
We depend on key personnel, and the loss of services of our executive officers or other highly skilled employees could materially harm our business.
Our stock price has been and may continue to be volatile, and investors may experience substantial losses.
Risks Related to Our Business Model, Strategy, and Operating Environment
We operate in a rapidly evolving industry, and our business model and strategy may not be successful.
BTCS operates in blockchain infrastructure and decentralized finance (“DeFi”) markets that are characterized by rapid technological change, evolving market structures, shifting participant behavior, and significant market volatility. Our business model depends on our ability to operate and scale revenue-generating blockchain infrastructure activities, including validator node operations and block building, and to deploy digital assets into DeFi protocols. There can be no assurance that our operating model will continue to generate revenue at levels consistent with our expectations or that we will be able to achieve or maintain profitability.
Our results of operations may be materially affected by changes in Ethereum network activity, transaction fee dynamics, block-building market structure, protocol economics, competition, regulatory developments, and broader market conditions. We may also be required to invest significant resources in technology, security, compliance, and personnel to remain competitive.
Our business is highly dependent on Ethereum, and our concentration in ETH exposes us to significant risks that could materially adversely affect our business, financial condition, and results of operations.
A substantial portion of our operations are conducted on the Ethereum network, including validator node operations, block building, and DeFi activities, and we hold a substantial majority of our digital assets in ETH. Our financial condition, liquidity, and results of operations are materially dependent on the market price of ETH and the continued adoption and development of the Ethereum ecosystem. Our future performance depends in significant part on the continued adoption, use, and development of Ethereum, including its ability to scale transaction throughput, maintain network security and decentralization, support decentralized applications, attract and retain developers, and sustain user and institutional adoption. Ethereum is an open-source, decentralized network that is not controlled by any single entity, and its development and governance are conducted through a community-driven process. We have no ability to control the direction, pace, or outcome of Ethereum’s development, and changes to the Ethereum protocol or ecosystem may be implemented without our input or consent.
The Ethereum network faces competition from other blockchain networks, including established networks and emerging technologies. Competing networks may offer faster transaction speeds, lower fees, different security models, or other features that attract users, developers, and capital away from Ethereum. If Ethereum fails to maintain its competitive position, loses market share to competing networks, or experiences a sustained decline in developer activity, transaction volume, or total value locked in DeFi protocols, the economic value of our Ethereum-based operations could be materially reduced. In addition, the emergence of new technologies, such as alternative consensus mechanisms, cross-chain interoperability solutions, or entirely new blockchain architectures, could reduce the relevance or utility of Ethereum over time.
ETH has historically experienced significant price volatility and may continue to do so in the future. A sustained decline in the price of ETH, increased volatility, reduced liquidity, or adverse market sentiment could materially reduce the value of our digital asset holdings, impair our ability to raise capital, reduce revenue from our operations, and adversely affect our liquidity and ability to fund operations. In addition, adverse developments specific to Ethereum, including protocol changes, security incidents, reduced network activity, increased competition from other networks, regulatory actions, or changes in transaction execution markets, could materially adversely affect the profitability and scalability of our operations. Any decline in Ethereum adoption, transaction activity, network security, developer engagement, or ecosystem growth could reduce the economic value of block building, validator rewards, and DeFi opportunities. Because we have concentrated our operations on the Ethereum network, and hold a substantial majority of our digital assets in ETH, we may be less able to adapt to adverse developments affecting Ethereum than competitors with more diversified blockchain infrastructure operations, or digital asset holdings, and any sustained deterioration in the Ethereum ecosystem could have a disproportionate impact on our business.
We may not be able to successfully execute our strategy to scale our blockchain infrastructure operations and DeFi activities.
Our growth strategy includes expanding our Builder+ block building operations, maintaining and optimizing our validator node operations, and increasing digital asset deployments through Imperium. This strategy requires significant operational execution, infrastructure scaling, ongoing technology development, and disciplined capital allocation.
If we are unable to execute this strategy, including by failing to scale efficiently, manage risks, secure access to transaction flow, or deploy capital effectively, our revenues and profitability could be materially adversely affected.
We may be required to sell digital assets to fund operations, meet obligations, or respond to market conditions, which could result in realized losses and adversely affect our financial condition and results of operations.
We may, from time to time, sell digital assets to fund operations, meet obligations, manage liquidity, satisfy margin or collateral requirements, repay borrowings, or respond to adverse market conditions. We do not have a formal policy governing the timing, amount, or circumstances of digital asset sales, and such decisions are made by management based on operational needs, market conditions, and other factors. If we sell digital assets during periods of unfavorable market conditions or declining prices, we may incur realized losses that could materially reduce our net income or increase our net loss. In addition, sales of digital assets reduce the amount of assets available to support our revenue-generating activities, including staking, block building, and DeFi deployments, which could reduce future revenues.
We may also be required to sell digital assets at inopportune times to meet financial obligations, including obligations under our Senior Convertible Notes or DeFi borrowing arrangements. For example, if we experience a liquidity shortfall, a DeFi liquidation event, or an acceleration of amounts owed under our Senior Convertible Notes, we may be forced to sell digital assets rapidly and at unfavorable prices to satisfy such obligations. Forced sales during periods of market stress could result in significant realized losses and could further impair our liquidity and financial condition.
Digital asset market disruptions, exchange failures, or loss of liquidity could impair our ability to access or convert digital assets.
Digital asset markets may experience disruptions, reduced liquidity, operational failures, or insolvencies of centralized exchanges or other market participants. Such events could limit our ability to convert digital assets into cash or stablecoins, impair our ability to manage collateral, and materially adversely affect our liquidity.
Risks Related to Validator Node Operations (NodeOps)
Our validator node operations, including operations through pooled staking protocols, depend on reliable infrastructure, may be subject to reduced rewards, penalties, or slashing.
Validator node operations require continuous uptime, accurate performance, and secure infrastructure. If our validator nodes fail to perform properly due to software errors, misconfiguration, infrastructure outages, cybersecurity incidents, or other disruptions, we may earn reduced staking rewards and could be subject to penalties or slashing.
Slashing is a protocol-level penalty mechanism that can result in the loss of a portion of staked ETH. Any slashing event could result in a loss of digital assets and harm our business and reputation.
Risks related to our validator node operations through pooled staking protocols such as Rocket Pool could adversely affect our business, results of operations, and financial condition.
A portion of our validator node operations are conducted through pooled staking protocols, including Rocket Pool, where we contribute a portion of the ETH required to activate a validator and the remaining ETH is provided through protocol smart contracts funded by third-party participants. This operating structure exposes us to additional risks beyond traditional self-funded validator operations, including risks associated with smart contract performance, protocol design, and the actions of third-party participants.
If Rocket Pool or similar protocols experience smart contract vulnerabilities, governance changes, operational failures, liquidity constraints, or other disruptions, our ability to operate validator nodes, earn staking rewards, or access staked ETH may be adversely impacted. Changes to protocol parameters, incentive structures, or validator selection mechanics could reduce the profitability of these operations or increase the risks associated with participation. Because these protocols operate through autonomous smart contracts and decentralized governance, we may have limited ability to influence outcomes or mitigate losses in the event of protocol failure.
Changes to Ethereum staking economics, validator requirements, or protocol rules could reduce our staking revenues.
Ethereum protocol upgrades or changes may affect staking reward rates, validator requirements, penalties, withdrawal mechanics, minimum staking amounts, or other economic factors. The Ethereum community and core developers periodically implement protocol upgrades through a governance process that we do not control. Such changes could reduce the profitability of our validator operations, increase operational complexity, require additional capital investment, or materially adversely affect our results. In addition, future protocol changes could alter the competitive dynamics among validators or introduce new requirements that favor certain types of participants over others.
Staked ETH may be subject to withdrawal delays or other constraints that could adversely affect liquidity.
ETH staked in validator operations may be subject to protocol-level withdrawal queues, exit delays, or other technical constraints. During periods of network congestion or market stress, we may be unable to withdraw staked ETH in a timely manner, which could adversely affect liquidity and our ability to respond to market conditions.
Risks Related to Block Building (Builder+), MEV, and Transaction Execution
Our Builder+ revenues depend on highly competitive and rapidly evolving transaction execution markets.
Block building is a highly competitive activity where builders compete to assemble and submit optimized blocks. Our ability to earn revenue through Builder+ depends on our technology, infrastructure performance, latency, algorithm optimization, and our ability to consistently construct blocks selected by validators. The block-building market is characterized by rapid technological change, and competitors may deploy advanced algorithms, artificial intelligence, machine learning, or other technologies that improve their competitive position relative to ours. If we are unable to keep pace with technological developments or maintain competitive infrastructure performance, our block inclusion rates and revenues could decline.
Competitive dynamics may change rapidly, and we may be unable to maintain or improve our position. Increased competition may reduce margins, reduce block inclusion rates, or require increased payments to validators or other participants.
Our Builder+ operations depend on the continued functioning and adoption of the broader block-building and MEV relay ecosystem, and disruptions to that ecosystem could materially reduce our revenues.
Our block-building operations depend on the continued functioning of Ethereum’s proposer-builder separation (PBS) architecture and the related ecosystem of relays, validators, and transaction sources. The builder ecosystem is highly competitive and relies on third-party participants, including relays and validators, to transmit blocks and include them on-chain.
If relays, validators, or other critical participants modify their policies, restrict access, experience outages, impose additional requirements, or discontinue support for certain builders, our ability to deliver blocks competitively and generate execution-layer rewards may be adversely affected. In addition, changes in Ethereum protocol rules, validator behavior, relay concentration, or market structure could change the economics of block building or limit the effectiveness of our strategies.
Because block building is a rapidly evolving market, the continued viability of our Builder+ operations depends in part on factors outside of our control, and adverse developments could materially reduce revenues and operating results.
Changes to the Ethereum protocol could adversely affect the economics of our Builder+ operations.
Ethereum’s protocol continues to evolve through periodic upgrades and design changes that may affect transaction execution, block construction, validator behavior, and the distribution of rewards within the network. Future protocol upgrades or changes to Ethereum’s transaction processing or block construction mechanisms could reduce block-building opportunities, alter the availability or distribution of transaction fees and other block-related revenues, or otherwise materially change the economics of our Builder+ operations. Any such changes could adversely affect our revenues and operating results.
Our block-building activities may be subject to reputational risks, regulatory scrutiny, and evolving market norms.
Block building involves determining the order in which transactions are included in a block before submitting it to the network. In some cases, the ordering or selection of transactions may allow builders to capture additional transaction-related value. Certain participants in the blockchain ecosystem view some of these practices as controversial or potentially unfair. As a result, regulators, network participants, or other stakeholders may increase scrutiny of block-building activities or advocate for changes to market practices or protocol rules. If our block-building activities are perceived negatively or become subject to regulatory action or changing industry norms, our reputation, relationships with ecosystem participants, and ability to operate could be adversely affected.
Risks Related to DeFi Operations (Imperium), Smart Contracts, and Protocol Participation
Our participation in DeFi protocols and pooled staking arrangements exposes us to smart contract risk, oracle risk, governance risk, and protocol failure risk, which could result in the loss of digital assets.
Our operations involve deploying digital assets into decentralized finance protocols and pooled staking arrangements that rely on smart contracts to facilitate lending, borrowing, liquidity provision, staking, and other on-chain activities. Smart contracts may contain coding errors, vulnerabilities, or design flaws that could be exploited by malicious actors or result in unintended outcomes. Although we seek to deploy assets only to protocols that have undergone third-party security audits, such audits do not guarantee the absence of vulnerabilities, and previously audited protocols have experienced exploits resulting in significant losses. In addition, DeFi protocols and pooled staking arrangements may be subject to governance decisions, parameter changes, or upgrades that adversely affect revenue, liquidity, or the ability to withdraw assets. We may have limited or no ability to reverse transactions, recover assets, or seek recourse in the event of a smart contract exploit or protocol failure.
DeFi protocols and pooled staking arrangements may also experience oracle failures, liquidity shocks, or cascading liquidations that impair the functioning of the protocol or result in losses. DeFi lending protocols rely on price oracles and automated smart contract mechanisms, and oracle failures, manipulation, or delays could trigger liquidations or mispricing. If a protocol in which we participate experiences a failure, exploit, or other adverse event, we may lose some or all of the digital assets deployed in that protocol, which could materially adversely affect our financial condition and results of operations.
DeFi revenue is variable, may decline, and may not be sustainable.
Revenue generated through DeFi protocols are variable and depend on market conditions, protocol utilization, interest rates, liquidity, and participant behavior. Revenue may decline as additional capital enters protocols, as protocol economics change, or as market demand shifts.
DeFi protocols may change their rules, parameters, or governance decisions in ways that adversely affect our revenue.
Many DeFi protocols are governed by decentralized governance mechanisms. Governance decisions may change protocol parameters, economics, collateral requirements, supported assets, or other features. Such changes could reduce revenue, increase risk, or result in adverse outcomes.
Risks Related to ETH-Backed DeFi Borrowing, Leverage, and Liquidation
Our ETH-backed borrowings through DeFi protocols subject us to liquidation risk and declines in ETH prices or adverse protocol conditions could result in forcedliquidations, material losses, and potential defaults under our Senior Convertible Notes.
We have utilized decentralized finance protocols, including Aave, to borrow stablecoins collateralized by ETH. These borrowings are governed by smart contracts that require collateralization levels to be maintained above specified thresholds. Our outstanding borrowings through Aave currently exceed the limited exception provided under the terms of our Senior Secured Convertible Promissory Notes (the “Senior Convertible Notes”) for up to $750,000 of Aave borrowings. If the value of ETH declines, market volatility increases, borrowing rates rise, or protocol-level parameters change, our collateral ratios may deteriorate.
If our collateral ratios fall below required thresholds, the protocol may automatically liquidate a portion of our posted ETH collateral. Such liquidations may occur rapidly and without our consent, potentially at unfavorable prices, and may result in realized losses, reduced ETH holdings, reduced liquidity, or adverse impacts to our ability to operate and scale our business. In addition, periods of extreme market volatility or network congestion may impair our ability to add collateral, repay borrowings, or otherwise manage positions in a timely manner. Because liquidation mechanics are executed through automated smart contracts and market-based liquidators, the timing and extent of liquidation events may be difficult to predict or prevent.
A default or liquidation event related to our DeFi borrowings could constitute an “Event of Default” under the Senior Convertible Notes. This risk is compounded by ETH price volatility, as a significant decline in ETH prices could simultaneously trigger DeFi liquidations and an Event of Default under the Senior Convertible Notes, resulting in cascading adverse effects on our liquidity and financial condition. Upon an Event of Default, the holders of the Notes may exercise remedies available under the Notes and related financing documents, including acceleration of amounts owed and enforcement of security interests. Any such actions could materially and adversely affect our liquidity, financial condition, and results of operations.
Variable interest rates and protocol-level changes may increase our cost of capital.
Interest rates in DeFi lending protocols are variable and may change rapidly based on utilization and liquidity. Protocol changes or market conditions could increase borrowing costs and reduce the economic attractiveness of borrowing strategies.
Risks Related to Capital Markets, Financing Strategy, and Dilution
Our ability to raise capital may be limited, and we may need additional capital to execute our strategy.
Our growth strategy, including the expansion of our validator node operations, block-building activities, and DeFi deployments, may require additional capital beyond our current resources and cash flows from operations. We may also require additional capital to fund operating losses, respond to competitive pressures, pursue strategic acquisitions or investments, develop new products or services, or respond to unanticipatedchallenges or opportunities. Our ability to raise capital through equity offerings, debt financing, or other means depends on numerous factors, many of which are beyond our control, including:
prevailing market conditions for equity and debt securities, including interest rates, credit spreads, and investor demand;
investor sentiment toward digital asset-related companies, which may be adversely affected by regulatory developments, market volatility, or high-profile failures of other industry participants;
our stock price, trading volume, and market capitalization, which affect the attractiveness and feasibility of equity offerings;
our financial condition, results of operations, and the value of our digital asset holdings;
covenants and restrictions under our existing financing arrangements, including the Senior Convertible Notes;
our ability to maintain our listing on Nasdaq and comply with applicable listing standards; and
regulatory developments affecting digital asset companies, capital markets, or our specific business activities.
If we are unable to raise additional capital when needed, or if capital is only available on terms that are highly dilutive, restrictive, or otherwise unfavorable, we may be required to significantly reduce or delay our growth initiatives, curtail operations, sell digital assets at unfavorable prices, or pursue strategic alternatives, any of which could materially adversely affect our business, financial condition, and results of operations. In addition, our inability to raise capital could limit our ability to respond to competitive pressures or pursue strategic opportunities, which could weaken our competitive position over time.
Our business depends on access to banking services and financial infrastructure and the loss of banking relationships could materially adversely affect our business.
Our operations depend on continued access to banking services, payment processing, and traditional financial infrastructure. Financial institutions may be unwilling to provide services to companies engaged in digital asset activities due to regulatory uncertainty, compliance costs, reputational concerns, or internal risk management policies. Some digital asset companies have experienced the sudden termination or restriction of banking relationships, and there can be no assurance that our current banking relationships will continue or that we will be able to establish new banking relationships on acceptable terms. The loss of banking services could impair our ability to receive or make payments, manage liquidity, pay vendors and employees, access capital markets, or conduct ordinary business operations. In addition, regulatory guidance or informal pressure on financial institutions regarding digital asset customers could further limit our access to banking and financial services.
Sales of our common stock through our ATM program or other offerings may result in substantial dilution to existing shareholders.
We have established an at-the-market (“ATM”) offering program under which we may sell shares of our common stock from time to time at prevailing market prices. Sales under the ATM program, or the perception that such sales may occur, could adversely affect the market price of our common stock and result in significant dilution to existing shareholders. Because ATM sales are made at market prices without a fixed discount, the dilutive effect on existing shareholders depends on the prices at which shares are sold and the volume of shares sold over time. We have discretion to determine the timing and amount of any sales under the ATM program, and shareholders will not have advance notice of when or whether sales will occur.
In addition, we may issue additional shares of common stock or securities convertible into or exchangeable for common stock in connection with future financings, acquisitions, employee compensation, or other purposes. Any such issuances would further dilute the ownership interests of existing shareholders and could adversely affect the market price of our common stock. We may also issue securities with rights, preferences, or privileges senior to those of our common stock, which could adversely affect the rights of common stockholders.
Our Senior Convertible Notes may result in dilution and contain provisions that may adversely affect shareholders.
We have issued Senior Convertible Notes. Conversion of these notes could result in dilution to existing shareholders. The Senior Convertible Notes also include provisions that may affect our capital structure, liquidity, and financial flexibility.
In addition, the Senior Convertible Notes and related financing documents contain affirmative and negative covenants and other provisions that may restrict our ability to incur additional indebtedness, grant liens, make certain distributions, transfer assets, or otherwise engage in certain transactions without the consent of the noteholder. These provisions may limit our ability to pursue strategic transactions, obtain additional financing, manage our capital structure, or respond to changes in market conditions.
Our share repurchase program may not enhance shareholder value and may reduce liquidity.
Our share repurchase program is discretionary and may be modified, suspended, or discontinued. Repurchases may reduce liquidity available for operations and growth and may not increase shareholder value.
Risks Related to Cybersecurity, Custody, and Digital Asset Security
If we experience a cybersecurity incident, theft, loss of private keys, or compromise of wallet controls, we could lose digital assets and suffer significant harm.
Digital assets are controlled through cryptographic private keys and are subject to theft, loss, unauthorized access, and cybersecurity risks. If we lose access to private keys, experience a compromise of wallet infrastructure or access controls, or suffer a cybersecurity breach affecting our systems or those of our service providers, we may lose some or all of our digital assets. Such losses could be immediate, irreversible, and unrecoverable. The security of digital assets depends on the continued integrity of our private key management practices, including the use of multi-signature authorization, hardware security modules, cold storage, and access control procedures. A failure in any of these safeguards, whether due to human error, insider threat, social engineering, technical malfunction, or external attack, could result in the permanent loss of digital assets.
In addition, our ability to respond to and recover from a cybersecurity incident depends on our incident response capabilities, business continuity planning, and the effectiveness of our security monitoring and detection systems. If we fail to detect, contain, or remediate a security incident in a timely manner, the scope and magnitude of losses could be significantly greater. We may also be required to expend significant resources to investigate and remediate any security incident, implement additional protective measures, and address any resulting regulatory inquiries, litigation, or reputational harm.
We rely on third-party vendors, service providers, and infrastructure providers, and disruptions or failures involving these third parties could materially adversely affect our business.
We rely on third-party vendors and service providers to support certain aspects of our operations, including cloud hosting and infrastructure, digital asset wallet infrastructure, access controls, transaction signing, transaction workflows, software and security tooling, professional services, and other operational functions. These providers may have access to or control over components of our security infrastructure, and we depend on their continued performance, security practices, and operational reliability. While we seek to select reputable providers and implement safeguards, we do not control these third parties and may not be able to ensure their continued performance, reliability, security, or compliance with applicable laws. We may have limited visibility into, or control over, the security practices and internal controls of our third-party providers, and we cannot guarantee that their systems will remain secure or that they will meet their contractual obligations.
Disruptions, outages, performance degradation, cybersecurity incidents, security breaches, service interruptions, or other failures by third-party providers could impair our ability to operate validator nodes, block-building infrastructure, and DeFi activities, and could adversely affect our ability to access, safeguard, or transfer digital assets. Such failures could result in lost revenues, increased costs, reputational harm, and potential regulatory scrutiny. In addition, if a third-party provider experiences financial distress, service termination, or operational constraints, we may be required to transition services to an alternative provider, which could be costly, time-consuming, and disruptive. Certain services may also be difficult to replace in the short term, and alternative providers may not be available on favorable terms, if at all.
We do not maintain insurance coverage for losses of digital assets.
We do not maintain any insurance policies that would compensate us for the loss of any digital assets. Insurance coverage for digital asset losses is limited in availability, may be prohibitively expensive, and may not cover all potential loss scenarios. Accordingly, if our digital assets are lost, stolen, or otherwise compromised for any reason, we would bear the full economic loss, which could materially and adversely affect our financial condition, liquidity, and results of operations. In addition, even if we had insurance coverage in the future, policy terms, exclusions, coverage limits, or claim disputes could limit our ability to recover losses.
Risks Related to Regulation, Legal Uncertainty, and Government Oversight
The regulatory landscape for digital assets, blockchain infrastructure, DeFi, and related activities is rapidly evolving, and regulatory developments could materially adversely affect our business.
The legal and regulatory environment for digital assets, blockchain networks, DeFi protocols, and related activities remains uncertain and continues to evolve in the United States and internationally. Federal, state, and foreign regulators have taken and may continue to take actions that could materially affect the development, adoption, and use of digital assets and blockchain technologies.
Regulatory agencies, including the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), the Financial Crimes Enforcement Network (“FinCEN”), the Office of Foreign Assets Control (“OFAC”), the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”), state financial regulators, and foreign regulatory bodies have asserted or may assert jurisdiction over aspects of the digital asset ecosystem.
Changes in laws, regulations, enforcement priorities, or regulatory interpretations could adversely affect our ability to operate our business, access capital, deploy digital assets, participate in DeFi protocols, engage in block building, or conduct validator operations. Regulatory outcomes could also increase our compliance costs, require us to modify or terminate certain activities, or subject us to civil or criminal liability.
Digital assets, including ETH, are subject to evolving and uncertain regulatory classifications, and adverse regulatory developments, including classification of digital assets as securities or classification of the Company as an investment company under the Investment Company Act of 1940, could materially adversely affect our business.
Digital assets are subject to evolving and uncertain regulatory treatment under U.S. federal securities laws, commodities laws, and other regulatory frameworks. ETH, the primary digital asset we hold and use in our operations, is generally treated as a commodity for regulatory purposes, including by the CFTC and in connection with certain exchange-traded products approved by the SEC. However, the regulatory classification of digital assets remains unsettled and subject to ongoing debate among regulators, legislators, and market participants. The classification of any particular digital asset may change as a result of new legislation, regulatory rulemaking, enforcement actions, court decisions, or evolving interpretations by the SEC, CFTC, or other regulatory authorities.
If ETH or other digital assets that we hold, earn, or deploy were to be reclassified as securities, we and other ecosystem participants could become subject to significant regulatory requirements. Such requirements could include registration of digital assets as securities, registration as a broker-dealer or securities exchange, compliance with disclosure and reporting obligations, restrictions on trading and transferability, and limitations on who may purchase, hold, or transact in such assets. Any such determination could significantly reduce the liquidity, utility, and market value of ETH and other digital assets, disrupt our operations, and materially adversely affect our business and financial condition. In addition, if we were found to have violated securities laws by holding, transacting in, or facilitating transactions in unregistered securities, we could be subject to enforcement actions, penalties, disgorgement, and other remedies.
In addition, if certain digital assets or related instruments we hold or obtain through our operations were deemed “securities,” we could be deemed an “investment company” under the Investment Company Act of 1940 (the “Investment Company Act”). Under the Investment Company Act, a company may be deemed an investment company if it is engaged primarily in the business of investing, reinvesting, owning, holding, or trading in securities, or if investment securities comprise a significant portion of its assets.
If we were deemed to be an investment company, we would be required to register under the Investment Company Act, which would subject us to extensive and burdensome regulatory requirements, including restrictions on our capital structure, limitations on our ability to issue debt and equity securities, prohibitions or restrictions on transactions with affiliates, requirements regarding the composition and independence of our board of directors, custody requirements, and extensive compliance, reporting, and recordkeeping obligations. Registration as an investment company could fundamentally change our business model and make it impractical to continue our current operations. If we failed to register when required, we could be subject to SEC enforcement action, including injunctive relief, and could be prohibited from engaging in certain business activities. In addition, contracts entered into by an unregistered investment company may be voidable, and a court could appoint a receiver to take control of the company.
Our validator node operations, block-building activities, and DeFi participation may be subject to increased regulatory scrutiny and could be deemed to involve regulated activities.
Our operations involve participation in blockchain networks and DeFi protocols, including staking, block building, and digital asset deployments. Regulators may view certain of these activities as involving regulated financial services, including, without limitation, securities transactions, commodities transactions, investment contracts, swaps, lending, brokerage, exchange activity, clearing activity, custody, money transmission, or other regulated activities.
For example, regulatory authorities may assert that certain DeFi protocols operate as unregistered exchanges, broker-dealers, clearing agencies, or other regulated entities, or that participants in such protocols, including liquidity providers or borrowers, may be subject to regulatory obligations.
Similarly, regulators may scrutinize block-building activities or transaction execution markets. Regulatory action could require us to modify or cease certain activities, could reduce the profitability of our operations, and could expose us to enforcement actions.
Regulatory actions, enforcement proceedings, or legal restrictions affecting third parties and protocols we rely on could materially adversely affect our business.
In addition to the direct regulatory risks described above, our operations depend on the continued functionality, accessibility, and participation of third parties and decentralized protocols across the digital asset ecosystem. These include blockchain networks, DeFi protocols, stablecoin ecosystems, centralized exchanges and liquidity venues, custody and wallet infrastructure providers, and participants in Ethereum transaction execution markets, including validator and block-building infrastructure.
Governmental authorities have brought, and may continue to bring, enforcement actions and pursue regulatory initiatives involving digital assets, staking and validation activities, DeFi protocols, stablecoin issuers, crypto exchanges, custodians, wallet providers, and other ecosystem participants. Even if we believe our operations are conducted in compliance with applicable law, regulatory actions, restrictions, or adverse legal developments directed at third parties or protocols we rely on could materially disrupt our operations, reduce liquidity, restrict our ability to deploy or redeploy digital assets, increase compliance costs, reduce transaction flow or execution opportunities, or otherwise materially adversely affect our business, financial condition, and results of operations.
In addition, because portions of the digital asset ecosystem are decentralized, open-source, and not operated by a single identifiable entity, regulatory actions may result in indirect impacts, including reduced protocol participation, decreased liquidity, market fragmentation, changes in protocol governance or access policies, or the withdrawal of service providers. The occurrence of any of these events could materially adversely affect our ability to operate and scale our validator operations, block-building operations, and DeFi activities.
Regulatory authorities may take enforcement actions or adopt rules that could materially adversely affect our operations.
U.S. and international regulators, including the SEC, the CFTC, and other governmental authorities, continue to evaluate and develop regulatory frameworks applicable to digital assets, blockchain infrastructure, and decentralized finance activities. These regulators have broad authority to investigate and bring enforcement actions relating to digital asset markets and blockchain-based activities.
Even if we believe that we are operating in compliance with applicable laws and regulations, we may become subject to investigations, subpoenas, enforcement actions, litigation, or administrative proceedings related to our digital asset holdings, validator operations, block-building activities, or other aspects of our business. Regulatory authorities may also adopt new rules or interpretations that impose additional compliance requirements or restrictions on participants in the digital asset ecosystem.
Any such investigations, enforcement actions, or regulatory developments could result in significant legal costs, reputational harm, penalties, fines, injunctions, operational restrictions, or other adverse outcomes that could materially and adversely affect our business, financial condition, and results of operations.
Regulatory requirements related to anti-money laundering (“AML”), sanctions, and financial crime compliance could adversely affect our business.
Regulators may impose or expand AML, know-your-customer (“KYC”), sanctions, and other financial crime compliance requirements on digital asset activities. OFAC has issued sanctions-related guidance applicable to certain blockchain activities, and additional sanctions designations could impact DeFi protocols, relays, validators, or other ecosystem participants.
Although our operations are primarily non-custodial, regulators may nonetheless assert that certain activities require compliance obligations. If we are required to implement additional compliance measures, our costs may increase, and we may be required to restrict or cease certain activities.
We may be subject to state money transmission laws or other licensing requirements.
Certain state laws regulate money transmission and similar activities. State regulators have actively pursued enforcement actions against digital asset businesses and may interpret money transmission and similar laws broadly in the context of digital assets. If our activities were deemed to involve money transmission or similar regulated activity, we could be required to obtain licenses in multiple jurisdictions, comply with bonding requirements, maintain minimum net capital, implement compliance programs, submit to examinations, or restrict or cease certain operations. The cost of obtaining and maintaining state licenses, if required, could be substantial, and failure to comply with applicable state laws could result in civil or criminalpenalties, enforcement actions, or reputational harm.
Regulation of stablecoins could materially adversely affect our DeFi activities.
Stablecoins play a significant role in DeFi ecosystems, including as collateral, as a medium of exchange, and as a source of liquidity for lending and borrowing protocols. Our DeFi operations, including our ETH-backed borrowings through Aave, involve stablecoins such as USDC and USDT. Stablecoins are designed to maintain a stable value relative to a reference asset, typically the U.S. dollar, but there is no guarantee that any stablecoin will maintain its peg. Stablecoins have experienced depegging events in the past, including significant disruptions affecting major stablecoins, and such events could recur. A depegging event affecting stablecoins we hold or use could result in immediate losses, impair our ability to manage collateral or repay borrowings, and adversely affect our liquidity and financial condition.
If stablecoin regulation results in reduced availability, liquidity disruptions, restrictions on stablecoin usage, or prohibitions on certain stablecoins, our DeFi operations and borrowing activities could be materially adversely affected. For example, if stablecoins we use were prohibited, restricted, or deemed non-compliant with regulatory requirements, we may be required to transition to alternative stablecoins, which may have different risk profiles, liquidity characteristics, or protocol support. In addition, regulatory actions against stablecoin issuers, exchanges, or DeFi protocols that support stablecoins could disrupt the broader stablecoin ecosystem and adversely affect our ability to conduct DeFi operations. The occurrence of any of these events could materially and adversely affect our business, financial condition, and results of operations.
Tax laws and reporting requirements related to digital assets are evolving and could adversely affect our business.
Tax treatment of digital assets is complex and evolving. Changes in tax laws, IRS guidance, reporting requirements, or interpretations could increase our tax liabilities, impose additional reporting burdens, or affect the economics of our operations.
Accounting standards, SEC disclosure expectations, and audit practices for digital assets may evolve and could materially adversely affect our reporting obligations.
Accounting and disclosure requirements for digital assets, DeFi activities, and blockchain infrastructure operations continue to evolve. The SEC has issued and may continue to issue guidance or comment letters related to digital asset disclosures, custody practices, risk factors, revenue recognition, and other matters.
Changes in accounting standards, audit practices, or SEC expectations could increase our compliance costs, require additional disclosures, or affect our reported financial results.
International regulatory developments could adversely affect our business.
We may be affected by regulatory developments outside the United States. Foreign jurisdictions have adopted and may continue to adopt regulations restricting digital asset activities, imposing licensing requirements, or limiting access to DeFi protocols. Jurisdictions, including but not limited to the United Kingdom, Singapore, Hong Kong, and various other countries, have adopted or are developing their own regulatory frameworks for digital assets. If we seek to expand operations internationally or if our activities are deemed subject to foreign regulatory requirements, we may face significant compliance costs, licensing requirements, operational restrictions, or prohibitions that could materially limit our ability to operate or expand. In addition, international regulatory fragmentation could affect global market conditions, liquidity, and the value of digital assets.
Risks Related to Our Public Company Status, Internal Controls, and Reporting
We face increased financial reporting and internal control risks due to the complexity of our operations, and any failure to maintain effective internal control over financial reporting could adversely affect our business.
Our financial reporting requires significant judgment and estimation, particularly with respect to accounting for digital assets, DeFi borrowings, fair value measurements, revenue recognition related to blockchain infrastructure activity, non-cash validator payments, and equity-linked financing instruments such as convertible notes and warrants. These areas involve evolving accounting interpretations and may require complex valuation methodologies.
As our operations scale and become more complex, including through expanded DeFi activity and capital markets transactions, we may face increased risk of accounting errors, control deficiencies, or delays in financial reporting. In addition, because we operate with a relatively small management and finance team, our ability to maintain appropriate segregation of duties and control coverage may be constrained. If we are unable to maintain effective internal control over financial reporting, we may be unable to accurately report our financial results, comply with SEC reporting requirements, or prevent fraud. Any such failure could result in material misstatements, restatements, regulatory actions, loss of investor confidence, and could materially adversely affect the market price of our securities.
Our stock price may be volatile, and investors may lose all or part of their investment.
The market price of our common stock has experienced significant volatility and may continue to be volatile. The trading price of our common stock may be influenced by a number of factors, many of which are beyond our control, including:
fluctuations in the market price of ETH, Bitcoin, and other digital assets, which may affect investor perception of our company regardless of our actual exposure to such assets;
changes in market sentiment toward digital asset-related companies, blockchain technology, or the cryptocurrency industry generally, including as a result of negative publicity, regulatory developments, or high-profile failures of other industry participants;
our actual or anticipated operating results, financial condition, and liquidity, including any failure to meet revenue, earnings, or other guidance or expectations;
announcements regarding our business, strategy, digital asset holdings, DeFi activities, or capital allocation decisions, including any announcements regarding purchases, sales, or impairments of digital assets;
the timing, size, and perceived dilutive effect of capital markets transactions, including sales under our at-the-market offering program or conversion of our Senior Convertible Notes;
short selling activity, trading volume fluctuations, and the availability of shares for borrowing, which may increase volatility and create downward pressure on our stock price;
activity on social media platforms, online forums, and other channels that may cause significant volatility in our stock price unrelated to our operating performance or financial condition;
the initiation, modification, or cessation of research coverage by securities analysts, or changes in analysts’ estimates or recommendations regarding our company or the digital asset industry;
the inclusion or exclusion of our common stock from market indices, exchange-traded funds, or other investment products that track digital asset-related companies;
regulatory developments, enforcement actions, or litigation affecting us, other digital asset companies, or the industry generally;
cybersecurity incidents, digital asset thefts, or operational failures, whether affecting us or other industry participants;
macroeconomic conditions, including inflation, interest rates, recessionconcerns, and geopolitical events, which may affect risk appetite for digital asset-related investments; and
general market conditions and overall fluctuations in U.S. equity markets.
Because our business and strategy involve digital assets and blockchain-based operations, our stock price may be disproportionately affected by market developments in the digital asset industry relative to companies in other sectors. In addition, our relatively small public float and market capitalization may contribute to increased volatility and reduced liquidity in our common stock, making it more susceptible to significant price swings from relatively small changes in trading volume or investor sentiment. Securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and attention of management, and adversely affect our business. Volatility in our stock price could cause investors to lose all or part of their investment.
Risks Related to Intellectual Property, Personnel, and Operations
We depend on key personnel, and the loss of key personnel could harm our business.
Our success depends in significant part on the continued services of our key management, engineering, and operational personnel, including our Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, and other members of senior management and technical leadership. Our business requires specialized expertise in blockchain infrastructure, validator operations, block building, DeFi protocol participation, and digital asset custody and security. Competition for qualified personnel with these skillsets is intense, and we may not be able to attract, retain, and motivate key personnel on commercially reasonable terms.
If we lose the services of key personnel, including members of senior management or critical technical staff, we may experience disruptions in operations, delays in executing our strategic initiatives, reduced ability to develop or improve our infrastructure, and difficulties maintaining performance, security, and reliability across our operations. In addition, the loss of key personnel could result in the loss of institutional knowledge and could adversely affect relationships with counterparties, service providers, and strategic partners.
Our future success also depends on our ability to effectively manage and integrate new personnel as we scale operations. If we are unable to hire, retain, or effectively manage qualified personnel, our business, financial condition, and results of operations could be materially adversely affected.
Risks Related to Litigation
We may be subject to litigation, regulatory proceedings, and other legal actions, which could result in significant costs and adversely affect our business.
We are subject to the risk of litigation and regulatory proceedings in the ordinary course of business. These matters may include, among others, securities litigation, shareholder derivative actions, employment-related claims, intellectual property disputes, contractual disputes, and claims related to our digital asset activities. We may also be subject to investigations, inquiries, or enforcement actions by regulatory authorities relating to digital assets, blockchain infrastructure, DeFi participation, disclosures, or other matters.
Litigation and regulatory proceedings can be costly, time-consuming, and disruptive to management and operations, regardless of outcome. Adverse judgments, settlements, fines, penalties, or other outcomes could result in significant monetary damages, injunctive relief, reputational harm, restrictions on our operations, or other consequences that could materially adversely affect our business, financial condition, and results of operations.
In addition, the evolving regulatory environment for digital assets increases the risk of regulatory inquiries and enforcement actions, including in circumstances where regulatory expectations or interpretations change over time.
Strategic Evolution and Operating Focus
During 2025, BTCS completed a strategic realignment of its operations and capital allocation to focus primarily on Ethereum-based activities. As part of this transition, the Company discontinued validator node operations on non-Ethereum blockchains and liquidated the majority of its non-Ethereum digital asset holdings. The Company also discontinued the development and operation of legacy technology platforms, including StakeSeeker in 2024 and ChainQ in 2025, in order to concentrate resources on scalable, revenue-generating infrastructure and DeFi initiatives.
This repositioning reflects management’s assessment that Ethereum provides the most compelling long-term opportunity for infrastructure participation, transaction execution, and DeFi activity, given its network scale, liquidity, and ecosystem maturity.
Growth of Blockchain Infrastructure Operations
Blockchain infrastructure activities, consisting primarily of validator node operations (NodeOps) and block building (Builder+), represent a core driver of the Company’s revenues. Validator operations provide recurring ETH-denominated revenues through protocol-defined incentives and transaction fees, while Builder+ has emerged as a higher-growth, technology-driven revenue opportunity.
Builder+ participates in Ethereum’s transaction execution ecosystem by constructing and submitting optimized transaction blocks. During 2025, the Company continued to scale Builder+ operations by expanding private order flow integrations, enhancing infrastructure efficiency, and increasing participation across Ethereum blockspace markets. As a result, block building became an increasingly significant contributor to the Company’s revenue mix, reflecting both increased transaction activity and improved execution performance.
Management believes that block building represents a scalable opportunity, driven by technology, infrastructure optimization, and access to transaction flow rather than asset lock-up requirements.
Expansion into Decentralized Finance through Imperium
In 2025, BTCS launched Imperium, a DeFi-focused operating segment designed to deploy digital assets into decentralized protocols as a liquidity provider and market participant. Imperium enables the Company to allocate assets across DeFi protocols that facilitate lending, borrowing, liquidity provision, and other on-chain financial activities.
In contrast to traditional staking, which is subject to protocol-defined reward structures and lock-up mechanics, DeFi participation allows for more dynamic capital allocation based on market conditions, liquidity needs, and risk considerations. Revenues generated through Imperium are variable and dependent on protocol utilization and prevailing market conditions.
Management expects Imperium to represent an increasingly important component of the Company’s operations and believes that DeFi activities provide opportunities to enhance risk-adjusted returns, improve capital flexibility, and complement the Company’s blockchain infrastructure operations, although there can be no assurance that these objectives will be achieved. BTCS plans to further expand asset deployments into DeFi protocols and pursue additional integrations to broaden its on-chain activities, subject to market conditions, available capital, regulatory developments, and risk management considerations.
Capital Strategy
A central element of BTCS’s operating model is its integrated capital strategy, which combines decentralized finance mechanisms with traditional capital markets activities. During 2025, the Company utilized a combination of at-the-market equity (“ATM”) offerings, structured convertible notes, and ETH-backed DeFi borrowing to fund operations, scale infrastructure, and deploy digital assets.
This approach is designed to support growth while managing liquidity and minimizing reliance on equity issuance alone. Management actively evaluates capital allocation across validator operations, block-building support, and DeFi deployments based on expected returns, risk profiles, and market conditions.
Outlook
BTCS enters 2026 with a business model centered on expanding high-margin scalable revenue opportunities. Management believes that continued expansion of Builder+ operations and increased deployment through Imperium position the Company to participate meaningfully in the ongoing growth of decentralized technologies and crate long-term shareholder value.
The following sections of Management’s Discussion and Analysis provide additional detail regarding the Company’s digital asset and treasury management practices, known trends and uncertainties, results of operations, and liquidity and capital resources.
Use of Digital Assets in our Operations
Digital assets, primarily ETH, play a central role in the Company’s operating model. Unlike companies that hold digital assets primarily for investment or appreciation purposes, BTCS uses its digital asset holdings as operating assets to support revenue generation, infrastructure participation, and decentralized finance (DeFi) activities.
Operating Use of Digital Assets
ETH held by the Company is actively deployed across its business lines, including validator node operations, block building support, and DeFi activities conducted through the Imperium operating segment. Management continuously evaluates how digital assets are utilized among these activities based on revenue, gross profit, liquidity requirements, risk considerations, and prevailing market conditions.
As a result, the Company’s digital asset balances may fluctuate period over period due to operational activities, redeployments, protocol participation, borrowing activity, and market price movements. These fluctuations are a function of the Company’s operating strategy and may materially impact reported financial results.
Treasury Management Philosophy
The Company’s treasury management strategy is designed to balance capital efficiency, liquidity, and risk management. BTCS seeks to maintain sufficient liquidity to support ongoing operations while deploying excess digital assets in a manner intended to generate incremental on-chain returns.
Management does not maintain a fixed allocation policy for digital assets across staking, block building support, or DeFi activities. Instead, allocation decisions are made dynamically, taking into account market conditions, protocol economics, and the Company’s capital requirements.
In certain circumstances, the Company may convert a portion of its digital asset holdings to cash to fund operations, meet obligations, or manage liquidity. Conversely, the Company may deploy cash or stablecoins into digital assets to support infrastructure operations or DeFi participation.
Decentralized Finance Asset Deployment
Through Imperium, BTCS deploys digital assets into decentralized finance protocols that facilitate lending, borrowing, liquidity provision, and other on-chain financial activities. These deployments are intended to enhance capital flexibility and improve risk-adjusted returns relative to traditional staking activities.
Returns generated through DeFi participation are variable and subject to factors such as protocol utilization, market demand, interest rates, liquidity conditions, and smart contract risks. Management actively monitors these factors and may adjust deployment strategies in response to changes in market conditions or protocol performance.
Risk Management Considerations
The Company’s digital asset and treasury management activities expose it to risks including digital asset price volatility, protocol changes, smart contract vulnerabilities, and liquidity constraints. Management seeks to mitigate these risks through diversification of deployments, active monitoring of protocol performance, conservative leverage practices, and disciplined capital allocation.
The Company’s approach to digital asset custody, wallet management, and security controls is described in Item 1 - Our Business and Growth Strategy and is designed to support operational flexibility while minimizing exposure to third-party custody and counterparty risks.
Role of Digital Assets in Ongoing Operations
Management believes that the active deployment of digital assets across blockchain infrastructure and DeFi activities is a core differentiator of the Company’s operating model. As the Company continues to scale Builder+ operations and expand Imperium, digital assets are expected to remain central to the Company’s treasury strategy and overall business performance.
Known Trends, Market Conditions, and Uncertainties
BTCS operates in blockchain infrastructure and decentralized finance (DeFi) markets that are characterized by rapid technological change, evolving market structures, and significant variability in economic outcomes. The Company’s operating results and financial condition are influenced by a number of known trends, market conditions, and uncertainties, many of which are interrelated.
Digital Asset Market Volatility
The market prices of digital assets, particularly ETH, are subject to significant volatility driven by a variety of factors, including macroeconomic conditions, investor sentiment, regulatory developments, technological changes, and activity within decentralized ecosystems. Because ETH is a core operating asset for the Company, fluctuations in its market price may significantly affect the value of the Company’s digital asset holdings, reported results, and liquidity.
While management actively deploys ETH to support revenue generation and operational activities, changes in ETH prices may impact period-to-period financial results independent of underlying operating performance.
Blockchain Network and Protocol Dynamics
The Company’s infrastructure and DeFi activities depend on the continued operation and adoption of the Ethereum network and related protocols. Changes to network protocols, including updates to consensus mechanisms, transaction fee structures, validator economics, or block-building dynamics, may materially and adversely affect the profitability, scalability, and economics of the Company’s operations. The Company has no control over such protocol changes and may have limited ability to adapt its operations in response.
In addition, transaction volumes, network congestion, and user activity levels can influence execution-layer rewards, block-building opportunities, and validator returns. These factors may vary significantly over time and are entirely outside the Company’s control.
Block Building Market Conditions
Block building is a competitive and evolving segment of the Ethereum ecosystem. Builder+ performance is influenced by access to transaction flow, infrastructure efficiency, latency, competition among Builders, and Validator participation patterns. As transaction execution markets mature, competitive dynamics may change, and margins may fluctuate as participants optimize strategies or new entrants emerge.
Management continues to invest in technology, infrastructure optimization, and business development initiatives to adapt to these evolving conditions, but there can be no assurance that current market conditions will persist or that such investments will yield positive returns or competitive advantages.
Decentralized Finance Revenue Variability
Revenues generated through Imperium’s DeFi activities are inherently variable and depend on protocol utilization, prevailing fee rates, liquidity conditions, and market demand for decentralized financial services. DeFi rewards may compress or fluctuate over time as capital flows into or out of protocols, new products are introduced, or risk parameters are adjusted.
In addition, DeFi participation exposes the Company to protocol-specific risks, including smart contract vulnerabilities, governance decisions, and liquidity constraints, which may affect returns or result in losses.
Regulatory Environment
The regulatory landscape for digital assets and blockchain-based activities continues to evolve in the United States and internationally, including in Nevada where the Company is organized. Changes in federal or state laws, regulations, or regulatory interpretations (including those promulgated by the SEC, CFTC, FinCEN, or state regulators) could materially affect the Company’s operations, access to capital, ability to participate in certain activities, or compliance obligations. The Company may be or may become subject to registration, licensing, reporting, or other compliance requirements at the federal, state, or international level, which could impose significant costs and operational constraints on the Company. While management monitors regulatory developments and seeks to adapt its operating model accordingly, regulatory outcomes remain uncertain and may result in material adverse effects on the Company’s business, financial condition, and results of operations.
Implications for Operating Performance
Management believes that these trends and uncertainties are inherent to operating in blockchain infrastructure and DeFi markets. The Company seeks to manage these dynamics through disciplined capital allocation, active asset deployment, diversification of operating activities, and ongoing evaluation of market conditions. However, the impact of these factors on future operating results and financial condition may be material.
Results of Operations for the Years Ended December 31, 2025 and 2024
The following table reflect our operating results for the years ended December 31, 2025 and 2024:
For the Year Ended
December 31,
$ Change
% Change
Revenues
Blockchain infrastructure revenues
DeFi revenues
Total revenues
Cost of revenues
Blockchain infrastructure costs
DeFi costs
Total cost of revenues
Gross profit
Operating expenses:
Professional fees
General and administrative
Research and development
Compensation and related expenses
Marketing
Realized losses on digital asset transactions
Unrealized loss (gain) on digital assets
Total operating expenses
Other income (expenses):
Interest expense
Change in fair value of warrant liabilities
Impairmentloss on non-fungible tokens
Loss on settlement of dividend payable
Loss on extinguishment of debt
Other income
Total other income (expenses)
Net loss
Revenues
Revenue for Fiscal 2025 increased significantly compared to Fiscal 2024, primarily due to the continued expansion of our Builder+ operations, which focus on block-building activities across the Ethereum and Binance Smart Chain (BSC) networks, and the addition of Imperium DeFi activities during the period.
During Fiscal 2025, Builder+ operations accounted for approximately 80% of total revenue, NodeOps contributed approximately 12%, and Imperium DeFi revenue represented the remaining 8%. The year-over-year increase reflects the scaling of Builder+ operations and the commencement of block building on BSC, which together resulted in a substantial increase in block rewards earned during the period. Increases in NodeOps and Imperium revenues were supported by the deployment of additional digital assets acquired through capital-raising activities during Fiscal 2025.
While we anticipate continued growth across Builder+, NodeOps, and Imperium as we expand block-building, staking, and DeFi activities, the fair value of rewards may fluctuate due to the inherent volatility of digital assets markets. Accordingly, revenue recognized in future periods may be materially affected by changes in the market prices of the underlying digital assets at the time of reward receipt or recognition.
Cost of Revenues
Cost of revenues for Fiscal 2025 increased compared Fiscal 2024, primarily due to higher validator payments (“Validator Payments”) made to external parties to secure block space as part of our Builder+ block-building activities. The increase also reflects higher blockchain infrastructure and network operation costs associated with the expansion of block-building and DeFi activities. These higher costs were partially offset by efficiencies realized within our validating infrastructure, including lower hosting fees and reduced reliance on third-party service providers.
Although revenue increased year over year due to the scaling of Builder+ operations and the addition of Imperium activities, cost of revenues increased at a faster rate than revenues, reflecting higher Validator Payments and infrastructure costs associated with expanded block-building activity. As a result, gross margins remain sensitive to validator economics, execution-layer reward dynamics, and broader crypto market conditions.
We expect cost of revenues to continue to rise in line with the scaling of Builder+ and DeFi operations. Gross margins may fluctuate depending on the level of Validator Payments required to secure block inclusion and on broader crypto market conditions that influence block reward values.
Operating Expenses
Professional fees
Professional fees for Fiscal 2025 increased compared to Fiscal 2024, primarily due to higher legal and accounting costs associated with the Company’s new Form S-3 registration statement and the expansion of its ATM program during Fiscal 2025. The increase also reflects higher investor relations expenses.
We expect professional fees to decrease in Fiscal 2026, as the Fiscal 2025 fees related to the S-3 filing and ATM program are non-recurring. Investor relations expenses may continue to fluctuate based on timing, opportunities, and the scope of shareholder engagement initiatives.
General and Administrative Expenses
General and administrative expenses for Fiscal 2025 increased compared to Fiscal 2024, primarily due to higher payments for order flow incurred in connection with supporting the Company’s expanding Builder+ block-building activities, as well as SEC filing fees associated with the filing of the new Form S-3 registration statement. These increases were partially offset by continued discipline in overall administrative spending.
We expect general and administrative expenses to fluctuate based on operational growth, regulatory filing activity, and the level of block-building and order flow support required as operations continue to scale.
Research and Development Expenses
Research and development expenses for Fiscal 2025 decreased compared to Fiscal 2024, primarily due to the completion and wind-down of development activities related to legacy technology platforms, including StakeSeeker in 2024 and ChainQ in 2025, and the transition of certain Builder+ initiatives from development into routine, revenue-generating operations. During 2025, research and development activities were more limited and consisted primarily of feasibility assessments, testing, and evaluation of blockchain infrastructure enhancements and decentralized finance initiatives, resulting in lower overall R&D spending compared to the prior year.
Research and development expenses may fluctuate in future periods based on the scope and timing of exploratory initiatives and infrastructure enhancements.
Compensation and Related Expenses
Compensation and related expenses for Fiscal 2025 decreased compared to Fiscal 2024, primarily due to the timing of performance-based bonus accruals and a reduction in stock-based compensation expense resulting from the forfeiture of unvested restricted stock following certain executive transitions earlier in the year. On a year-to-date basis, compensation expenses remained relatively consistent, reflecting continued salary and benefits costs associated with core personnel and estimated accruals for performance-based incentives.
The Company continues to utilize equity-based compensation as a key component of its total rewards strategy to align employee incentives with long-term shareholder value. We expect total compensation costs to fluctuate based on headcount changes, the timing of performance-based accruals, and the issuance or forfeiture of equity awards.
Marketing Costs
Marketing expenses for Fiscal 2025 increased compared to Fiscal 2024, primarily due to expanded advertising campaigns and activities aimed at enhancing brand visibility and supporting business development initiatives. Marketing spend is expected to remain at or above current levels as the Company continues to pursue strategic growth and community engagement efforts.
Realized Losses on Digital Assets Transactions
Realized losses on digital assets transactions for Fiscal 2025 increased compared to Fiscal 2024, primarily due to the sale of non-core, non-ETH digital assets that had previously carried unrealized losses. These transactions were executed as part of a broader effort to reallocate resources toward core staking and block-building operations. Future realized gains or losses will depend on the timing and market conditions of any additional digital asset sales.
Overall Operating Expense Trend
Total operating expenses for Fiscal 2025 increased compared to Fiscal 2024, reflecting the continued scaling of the Company’s blockchain infrastructure and DeFi operations, including higher costs associated with block-building activities, personnel, and public company compliance. Operating expenses for the current year also included unrealized losses on digital assets, reflecting changes in the fair value of ETH and other digital assets held and deployed in the Company’s operations.
While management continues to focus on disciplined expense management, operating expenses may fluctuate significantly from period to period due to changes in digital asset prices, non-cash compensation expense, and the level of infrastructure and DeFi activity required to support the Company’s operating strategy.
Other Income (Expenses)
Interest Expense
Interest expense for Fiscal 2025 increased compared to Fiscal 2024, primarily due to interest accrued on decentralized borrowings through Aave and other DeFi lending protocols, as well as interest and amortization expense related to the Company’s May 2025 and July 2025 Senior Secured Convertible Notes (the “Notes”). This includes both cash interest paid and the amortization of debt discount over the term of the Notes.
We expect interest expense to rise in future periods as a result of ongoing utilization of DeFi borrowings and the full-term amortization of outstanding convertible notes.
Unrealized Loss (Gain) on Digital Assets
The Company recognized significant unrealized losses in the fair value of its digital asset holdings for Fiscal 2025, compared to unrealized gains for Fiscal 2024. The change was primarily driven by declines in the market prices of Ethereum and other digital assets held by the Company during the latter portion of the year, reflecting the inherent volatility of digital asset markets, which may continue to materially affect the reported fair value of digital assets in future periods.
Change in Fair Value of Warrant Liabilities
The Company recognized a non-cash gain resulting from the change in the fair value of warrant liabilities for Fiscal 2025, compared to a loss for Fiscal 2024. The change was primarily attributable to movements in the Company’s stock price and related volatility during the period. Because these warrant liabilities are remeasured at fair value each reporting date, future gains or losses will depend on changes in the Company’s share price and other valuation inputs.
Impairmentloss on non-fungible tokens
For Fiscal 2025, the Company recorded an impairmentloss on non-fungible tokens (“NFTs”). The loss reflects a decline in the estimated fair value of the Company’s NFTs below their carrying value during the period. The Company does not currently anticipate significant NFT-related activity as part of its ongoing operations.
Loss on settlement of dividend payable
For Fiscal 2025, the Company recorded a loss on settlement of dividend payable related to the settlement of a special dividend distributed in Ethereum. The loss reflects changes in the fair value of Ethereum between the date the dividend payable was recorded and the date the dividend was settled. The Company does not currently anticipate declaring similar digital asset dividends on a recurring basis.
Loss on Extinguishment of Debt
The Company recorded a loss on extinguishment of debt for Fiscal 2025 related to on-chain debt swaps executed through decentralized finance (DeFi) lending protocols. Future gains or losses from such transactions may vary depending on the timing and structure of debt refinancings or restructurings undertaken within DeFi platforms.
Overall Other Income (Expense) Impact
Total other income (expenses), net, reflected a net expense for both the years ended Fiscal 2025 and 2024. The net expense for 2025 was primarily driven by interest expense incurred in connection with DeFi borrowings and outstanding convertible notes, partially offset by non-cash gains from the remeasurement of warrant liabilities. Other income (expenses) in 2024 were comparatively lower, reflecting the absence of similar interest-bearing obligations during that period.
Net Loss
Net loss for Fiscal 2025 increased compared to Fiscal 2024 primarily due to unrealized losses on the fair value of the Company’s digital asset holdings resulting from declines in digital asset market prices during the year, as well as realized losses associated with the sale of non-core, non-Ethereum digital assets as part of the Company’s strategic realignment. These items were non-cash in nature, except for realized losses on asset sales.
Net loss was also affected by higher interest expense related to decentralized finance borrowings and convertible notes, as well as changes in the fair value of warrant liabilities. These impacts were partially offset by increased revenues from blockchain infrastructure operations, including Builder+ and NodeOps activities. The Company’s results of operations may continue to fluctuate materially from period to period due to digital asset price volatility, financing activities, and changes in valuation-related items.
Liquidity and Capital Resources
ATM Financing
On September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time to time, shares of its common stock through H.C. Wainwright, subject to the availability of an effective registration statement on Form S-3. The initial ATM sales were conducted under a $100,000,000 shelf registration statement that became effective in September 2021.
On October 4, 2024, a new Form S-3 registration statement became effective, increasing the total amount of securities that may be offered and sold under the Company’s shelf registration to $250,000,000. As of the date of this report, there was approximately $103,380,000 available for sale under this Form S-3 registration statement.
On July 22, 2025, the Company entered into an amendment to its engagement with H.C. Wainwright in connection with a new Form S-3 registration statement filed on July 23, 2025, to register up to $2,000,000,000 of securities for future issuance (the “New Registration Statement”). The New Registration Statement was approved by the SEC and declared effective on August 1, 2025. As of the date of this report, the Company had not sold any securities under the New Registration Statement.
From September 14, 2021 through March 22, 2026, the Company sold a total of 32,762,523 shares of common stock under the ATM Agreement for aggregate total gross proceeds of approximately $163,597,000 at an average selling price of $4.99 per share, resulting in net proceeds of approximately $158,539,000 after deducting commissions and other transaction costs.
Share Repurchase Program
On September 4, 2025, the Board authorized a share repurchase program permitting the Company to repurchase up to $50 million of its common stock over a three-year period. Repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934 and applicable state law. We have engaged H.C. Wainwright & Co., LLC as the sole broker to implement the program. The program does not obligate the Company to repurchase any specific number of shares and may be modified, suspended, or discontinued at any time.
From September 11, 2025 through March 22, 2026, the Company repurchased and retired 888,677 shares of our common stock for an aggregate purchase price of approximately $4,000,000. The repurchases were funded from available cash on hand and are presented as a financing cash outflow in our statement of cash flows. All repurchased shares were immediately retired and are no longer considered issued or outstanding. As of March 22, 2026, approximately $46,000,000 remained available for repurchases under the authorization.
The Company expects that any future repurchases will be subject to our liquidity position, prevailing market conditions, and other capital allocation priorities, including funding of operations and strategic initiatives.
DeFi Borrowing
From January 1, 2025 through March 22, 2026, the Company borrowed an aggregate of approximately $123,477,000 in stablecoins, primarily USDT and GHO, through Aave, a DeFi lending protocol, using ETH as collateral, and repaid approximately $79,669,000 during the same period. These borrowings included transactions executed in connection with on-chain debt refinancing activities. As of March 22, 2026, the Company had approximately $43,965,000 in outstanding DeFi borrowings, inclusive of accrued interest, collateralized by approximately 49,949 ETH with an aggregate fair market value of $103,000,000, based on the closing price of $2,062 per ETH on that date. Because these borrowings are overcollateralized, declines in the market price of ETH could require the Company to post additional collateral or repay a portion of the borrowings to maintain required collateralization levels under the Aave protocol. Management monitors the collateral value and associated loan health factors on an ongoing basis and may add collateral or reduce borrowings in response to significant market movements.
Borrowings through Aave accrue interest at variable rates determined by Aave’s on-chain smart contracts, which adjust dynamically based on protocol liquidity and market utilization. ETH collateral posted to Aave simultaneously accrues variable interest at rates that fluctuate based on the same market factors. These rates are determined algorithmically by the protocol based on market conditions and are publicly available through on-chain protocol data. As a result, the Company’s net cost of capital may vary depending on prevailing protocol-level conditions. The Company has no control over these rate adjustments and is subject to the risk of significant rate increases. As of March 22, 2026, the Company had outstanding borrowings denominated in USDT and GHO, with variable borrowing rates on the Aave protocol applicable to those borrowings of approximately 3.04% and 3.05% per annum, respectively.
Borrowings through DeFi protocols are subject to risks not present in traditional financing arrangements, including collateral liquidation risk, protocol governance changes, smart contract vulnerabilities, manipulation risk, market volatility affecting collateral values, and the absence of traditional legal recourse or bankruptcy protections. Management actively monitors collateralization ratios and protocol conditions and may reduce or repay borrowings in response to market movements or changes in risk tolerance. As of March 22, 2026, the Company has not experienced any full or partial liquidation events related to its DeFi borrowings.
Convertible Notes Payable
In May 2025, the Company completed a private placement of Senior Secured Convertible Notes in the aggregate principal amount of approximately $7,811,000, for net cash proceeds of approximately $7,306,000. In connection with the offering, the Company also issued approximately 1.9 million five-year warrants, exercisable at $2.75 per share. The notes mature in May 2027, bear interest at a rate of 6% per annum, and are convertible into shares of common stock at a conversion price of $5.85 per share.
In July 2025, the Company completed an additional private placement of Senior Secured Convertible Notes in the aggregate principal amount of approximately $10,050,000, for net cash proceeds of approximately $9,538,000. In connection with the offering, the Company agreed to issue approximately 879,000 five-year warrants, exercisable at $8.00 per share. The notes mature in July 2027, bear interest at 6% per annum, and are convertible into shares of common stock at a conversion price of $13.00 per share.
The Company used the proceeds from both offerings primarily to accelerate the accumulation of ETH, expand operational capacity, and support the continued expansion of its blockchain infrastructure operations. The notes from the May and July 2025 offerings are secured by all of the Company’s assets as collateral, except for Ethereum deposited as collateral for USDT borrowings on Aave and certain other exclusions.
Dividends and Capital Distributions
During fiscal year 2025, the Company utilized a combination of cash and digital asset distributions as part of its capital allocation strategy.
In August 2025, the Board approved a special dividend of $0.05 per share on the Company’s common stock and Series V Preferred Stock. Holders of common stock were permitted to elect to receive the dividend in either cash or ETH, while holders of Series V Preferred Stock received the dividend solely in cash. The dividend was paid in October 2025 through aggregate cash payments of approximately $2,680,000 and distributions of ETH to common stockholders who elected to receive ETH. The cash portion of the dividend was funded from existing cash balances, while the ETH distributions were settled using digital assets held by the Company.
In addition, the Board authorized a one-time loyalty payment of $0.35 per share, payable solely in ETH, to eligible holders of common stock who satisfied specified opt-in and share-holding requirements. The loyalty payment was designed to reward long-term stockholders and was settled in February 2026 through the distribution of ETH. Because the loyalty payment was settled in digital assets, it did not require the use of incremental cash resources at the time of payment, although it reduced the Company’s digital asset holdings available for operational use and staking activities.
As of December 31, 2025, the Company did not have any recorded dividend payables or other obligations related to these distributions. The Company does not currently anticipate declaring regular cash or digital asset dividends, and the declaration of future dividends or other capital distributions, if any, will depend on the Company’s financial condition, results of operations, liquidity position, capital requirements, and other factors considered by the Board.
Liquidity
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and settlement of liabilities in the normal course of business.
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At December 31, 2025, the Company had approximately $1,526,000 of cash and cash equivalents and working capital of approximately $150,645,000.
As of March 22, 2026, the Company had approximately $7,498,000 of cash and stablecoins and the fair market value of the Company’s liquid digital assets was approximately $118,951,000.
As of March 22, 2026, the Company had total debt obligations of approximately $61,826,000, consisting of approximately $43,965,000 under its lending arrangement with Aave Protocol and approximately $17,861,000 convertible notes payable.
The Company believes that its existing cash and digital assets, together with the proceeds from recent convertible note financings and access to capital through its ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures, strategic initiatives, and contractual obligations for at least the next twelve months from the filing date of this report. This assessment is based on current market conditions, regulatory environment, and management’s operational plans, all of which remain subject to change.
Certain digital assets may be subject to protocol-defined unstaking or withdrawal periods, which could limit the Company’s ability to rapidly convert those assets to cash. As of March 2 2 , 2026, unstaking periods for the Company’s staked digital assets generally ranged from several hours to seven days, though such periods may change based on protocol upgrades or network conditions. Market volatility, network congestion, or regulatory developments could further restrict liquidity or adversely affect realized prices.
Cash Flows
Cash Used in Operating Activities
Cash used in operating activities was approximately $9,784,000 for Fiscal 2025, compared to approximately $3,530,000 for Fiscal 2024. The increase reflects the Company’s expanded operating activity during the period, including the scaling of Builder+ block-building activities and the introduction of Imperium DeFi operations, as well as changes in working capital associated with the growth of the business.
Operating cash flows are significantly influenced by non-cash items associated with the Company’s blockchain operating model, particularly digital asset-denominated revenues, Validator Payments, and fair value adjustments to digital assets. Although revenues are earned in digital assets, these assets are typically retained to support staking, block-building, and DeFi activities rather than immediately converted into cash, which may cause operating cash flows to differ significantly from reported revenues.
Digital asset-denominated revenues of approximately $16,480,000 earned from blockchain infrastructure and DeFi activities, which increased net income but did not result in operating cash inflows.
Validator Payments of approximately $14,300,000 made in native digital tokens to external validators as part of Builder+ block-building activities.
Realized losses on digital asset transactions of approximately $8,184,000, primarily from the sale of non-Ethereum digital asset holdings.
A non-cash adjustment of approximately $15,713,000 related to unrealized losses from the fair value measurement of digital assets, particularly Ethereum.
Stock-based compensation expense of approximately $657,000, primarily reflecting the issuance and ongoing amortization of equity-based awards to employees, including performance-based grants.
Amortization of debt discount and issuance costs of approximately $1,497,000 related to the outstanding convertible notes.
As Builder+ and Imperium operations continue to scale, we expect non-cash adjustments such as digital asset-denominated revenues, Validator Payments, and fair value changes in digital assets to may continue to have a significant effect on reported operating cash flows. The magnitude and direction of these effects will depend on market conditions and the timing of digital asset-related transactions.
Cash Used in Investing Activities
Net cash used in investing activities was approximately $197,497,000 during Fiscal 2025, compared to net cash provided by investing activities of approximately $2,632,000 in the Fiscal 2024. The 2025 activity primarily reflects the purchase of approximately $201,348,000 of digital assets, primarily ETH, to support scaling of Validator (NodeOps) and DeFi (Imperium) operations.
Investing cash outflows also included $500,000 of investments in three private blockchain-based technology companies during Fiscal 2025, partially offset by proceeds of approximately $4,362,000 from sales of non-core productive digital assets as we continue to streamline operations.
Cash Provided by Financing Activities
Cash provided by financing activities was approximately $206,830,000 during Fiscal 2025, compared to approximately $6,682,000 in the 2024 Period. Financing inflows during Fiscal 2025 were primarily driven by:
Net proceeds of approximately $135,161,000 from common stock sales under the Company’s ATM equity program.
Net proceeds of approximately $16,844,000 from the May and July 2025 issuances of senior secured convertible notes and related five-year warrants
Net proceeds from borrowings of approximately $61,500,000 in stablecoins via Aave, a decentralized finance (DeFi) lending protocol.
The Company also paid approximately $4,000,000 for share repurchases of the Company’s common stock, cash dividends of approximately $2,680,000, ETH dividends of approximately $496,000 and debt issuance costs of approximately $131,000 during Fiscal 2025.
We anticipate future financing activity may include additional DeFi borrowings and capital raised through the ATM program or through other financing instruments, as we continue to scale blockchain infrastructure and DeFi operations, enhance liquidity, and accumulate ETH in support of long-term growth.
Off Balance Sheet Transactions
As of December 31, 2025, there were no off-balance sheet arrangements, and we were not a party to any off-balance sheet transactions. We have no guarantees or obligations other than those that arise out of normal business operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures. These estimates and assumptions are based on management’s experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ materially from these estimates.
Management believes that the following accounting policies and estimates are critical to the understanding of the Company’s financial condition and results of operations because they involve significant judgment, are inherently subjective, and could have a material impact on the Company’s financial statements.
Accounting for Digital Assets and Fair Value Measurement
Digital assets, primarily Ethereum, represent a significant portion of the Company’s assets and are central to the Company’s operating model. The Company accounts for its digital assets as indefinite-lived intangible assets under ASC 350-60 and measures them at fair value in accordance with ASC 820.
Fair value represents the price that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement date. The Company determines fair value using observable market prices and assumes that its digital assets are sold in their principal market or, in the absence of a principal market, the most advantageous market to which it has access.
Changes in the fair value of digital assets are recorded in the statements of operations and may result in significant unrealized gains or losses during a reporting period. Because digital asset markets are subject to significant volatility, changes in market prices may materially affect the Company’s reported financial position, results of operations, and liquidity. As a result, the Company’s reported operating results may fluctuate significantly from period to period due to changes in digital asset prices, even when underlying operating activity is relatively consistent.
Classification and Liquidity of Digital Assets
The Company deploys digital assets across staking and DeFi activities as part of its operations. Digital assets are presented as current assets unless they are subject to protocol-imposed restrictions exceeding twelve months. Staked digital assets are classified as non-current if their lock-up periods extend beyond one year.
The majority of the Company’s digital assets are deployed either in staking arrangements with average lock-up periods of less than seven days or in DeFi arrangements that permit redemption on a near-immediate basis. Accordingly, these assets are classified as current because management expects they may be used to support operations or liquidity needs within the normal operating cycle.
These classifications require management judgment and are subject to change based on protocol rules, network conditions, and market liquidity.
Revenue Recognition from Blockchain Infrastructure and DeFi Activities
The Company recognizes revenue under ASC 606 , Revenue from Contracts with Customers . The Company’s revenues are generated from blockchain-based operations and comprise staking rewards earned from validator node operations, execution-layer transaction fees and rewards earned from block-building activities, and protocol-driven rewards earned from participation in DeFi protocols.
Substantially all revenue is earned and settled in native digital assets, which represent non-cash consideration measured at fair value on the date earned. Revenue is recognized when the Company satisfies its performance obligations, which generally occurs when validation activities are completed, blocks are successfully finalized on-chain, or DeFi rewards are earned and accrue to the Company.
Because revenues are earned in digital assets and measured at fair value at the time earned, reported revenues may fluctuate significantly from period to period due to changes in network activity, protocol mechanics, and digital asset market prices. In addition, because revenue recognition is based on blockchain protocol rules and on-chain activity, management must apply judgment in evaluating the timing of when rewards are earned and available for transfer.
DeFi Arrangements and Collateralized Borrowings
The Company participates in DeFi arrangements, including lending and borrowing activities conducted through decentralized protocols such as Aave. When the Company supplies ETH into DeFi protocols, the ETH may serve as collateral supporting on-chain borrowing activities.
Borrowings through DeFi protocols accrue interest at variable rates determined by on-chain smart contracts, which adjust dynamically based on protocol liquidity and market utilization. The Company is subject to collateral liquidation risk if the value of collateral declines relative to outstanding borrowings. For example, as a result of the drop in the price of ETH, in February 2026, BTCS sold approximately 10,000 ETH for total net proceeds of $18.7 million, and used net proceeds to repay outstanding principal indebtedness on Aave.
Management actively monitors collateralization ratios, protocol conditions, and market movements and may reduce or repay borrowings in response to changes in market conditions or risk tolerance. These arrangements require judgment in evaluating liquidity, collateral sufficiency, and the timing and classification of related interest expense.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation . Stock-based compensation expense is measured at fair value on the grant date and recognized over the requisite service period.
The estimation of fair value for stock options and market-based restricted stock units requires management to make assumptions regarding expected volatility, expected term, risk-free interest rates, and other inputs. These assumptions are based on historical data and management judgment and involve inherent uncertainties.
Changes in assumptions, forfeiture rates, or the Company’s stock price may materially affect the amount of stock-based compensation expense recognized in a given period.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 3 - Summary of Significant Accounting Policies to the financial statements for a discussion of recent accounting standards and pronouncements.
INFLATION
We have experienced, and are experiencing, the impact of domestic and global inflationary pressures largely outside of our control. This inflationary pressure impacts our cost structure, leading to operational adjustments, and increasing the cost of retaining talent and certain professional costs, despite our continued focus on controlling our costs where possible. Management is unable to accurately predict when, or if, these national and global inflationary pressures will subside, or their long-term impacts on our business and results of operations. We are actively monitoring the situation and assessing potential mitigation strategies.
RISK FACTORS
ITEM 1A. RISK FACTORS
The following risk factors should be considered, together with all other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes thereto. The risks described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations, cash flows, and prospects. If any of the risks described below occur, our business, financial condition, results of operations, cash flows, and prospects could be materially adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. The principal risks we face include, among others, the following:
Our business model is evolving and depends on our ability to operate and scale blockchain infrastructure and DeFi activities efficiently and profitably.
Our operating results, liquidity, and financial condition are materially impacted by the price volatility of Ethereum (“ETH”) and other digital assets.
Our operations depend on the continued adoption, functionality, and economics of the Ethereum network and related protocols, and changes to protocol rules, market structure, or participant behavior could materially adversely affect us.
Our block-building operations depend on highly competitive transaction execution markets, including proposer-builder separation (“PBS”), MEV relay ecosystems, and access to transaction flow, and changes in these markets could materially adversely affect our results.
Our DeFi activities, including ETH-backed borrowing and liquidity deployment, expose us to smart contract risks, protocol governance risks, liquidity risks, and potential liquidation events that could result in significant losses.
We rely on third-party infrastructure providers, decentralized protocols, and other ecosystem participants, and disruptions, failures, or regulatory actions affecting these third parties could materially adversely affect our business.
Our operations depend on access to banking services and financial infrastructure, and disruptions to these relationships could materially adversely affect our business.
The regulatory landscape for digital assets, blockchain infrastructure, DeFi, and related activities is rapidly evolving, and regulatory developments or enforcement actions could materially adversely affect our business.
We may be subject to cybersecurity incidents, digital asset theft, loss of private keys, and other security risks, and we do not maintain insurance covering losses of digital assets.
We depend on key personnel, and the loss of services of our executive officers or other highly skilled employees could materially harm our business.
Our stock price has been and may continue to be volatile, and investors may experience substantial losses.
Risks Related to Our Business Model, Strategy, and Operating Environment
We operate in a rapidly evolving industry, and our business model and strategy may not be successful.
BTCS operates in blockchain infrastructure and decentralized finance (“DeFi”) markets that are characterized by rapid technological change, evolving market structures, shifting participant behavior, and significant market volatility. Our business model depends on our ability to operate and scale revenue-generating blockchain infrastructure activities, including validator node operations and block building, and to deploy digital assets into DeFi protocols. There can be no assurance that our operating model will continue to generate revenue at levels consistent with our expectations or that we will be able to achieve or maintain profitability.
Our results of operations may be materially affected by changes in Ethereum network activity, transaction fee dynamics, block-building market structure, protocol economics, competition, regulatory developments, and broader market conditions. We may also be required to invest significant resources in technology, security, compliance, and personnel to remain competitive.
Our business is highly dependent on Ethereum, and our concentration in ETH exposes us to significant risks that could materially adversely affect our business, financial condition, and results of operations.
A substantial portion of our operations are conducted on the Ethereum network, including validator node operations, block building, and DeFi activities, and we hold a substantial majority of our digital assets in ETH. Our financial condition, liquidity, and results of operations are materially dependent on the market price of ETH and the continued adoption and development of the Ethereum ecosystem. Our future performance depends in significant part on the continued adoption, use, and development of Ethereum, including its ability to scale transaction throughput, maintain network security and decentralization, support decentralized applications, attract and retain developers, and sustain user and institutional adoption. Ethereum is an open-source, decentralized network that is not controlled by any single entity, and its development and governance are conducted through a community-driven process. We have no ability to control the direction, pace, or outcome of Ethereum’s development, and changes to the Ethereum protocol or ecosystem may be implemented without our input or consent.
The Ethereum network faces competition from other blockchain networks, including established networks and emerging technologies. Competing networks may offer faster transaction speeds, lower fees, different security models, or other features that attract users, developers, and capital away from Ethereum. If Ethereum fails to maintain its competitive position, loses market share to competing networks, or experiences a sustained decline in developer activity, transaction volume, or total value locked in DeFi protocols, the economic value of our Ethereum-based operations could be materially reduced. In addition, the emergence of new technologies, such as alternative consensus mechanisms, cross-chain interoperability solutions, or entirely new blockchain architectures, could reduce the relevance or utility of Ethereum over time.
ETH has historically experienced significant price volatility and may continue to do so in the future. A sustained decline in the price of ETH, increased volatility, reduced liquidity, or adverse market sentiment could materially reduce the value of our digital asset holdings, impair our ability to raise capital, reduce revenue from our operations, and adversely affect our liquidity and ability to fund operations. In addition, adverse developments specific to Ethereum, including protocol changes, security incidents, reduced network activity, increased competition from other networks, regulatory actions, or changes in transaction execution markets, could materially adversely affect the profitability and scalability of our operations. Any decline in Ethereum adoption, transaction activity, network security, developer engagement, or ecosystem growth could reduce the economic value of block building, validator rewards, and DeFi opportunities. Because we have concentrated our operations on the Ethereum network, and hold a substantial majority of our digital assets in ETH, we may be less able to adapt to adverse developments affecting Ethereum than competitors with more diversified blockchain infrastructure operations, or digital asset holdings, and any sustained deterioration in the Ethereum ecosystem could have a disproportionate impact on our business.
We may not be able to successfully execute our strategy to scale our blockchain infrastructure operations and DeFi activities.
Our growth strategy includes expanding our Builder+ block building operations, maintaining and optimizing our validator node operations, and increasing digital asset deployments through Imperium. This strategy requires significant operational execution, infrastructure scaling, ongoing technology development, and disciplined capital allocation.
If we are unable to execute this strategy, including by failing to scale efficiently, manage risks, secure access to transaction flow, or deploy capital effectively, our revenues and profitability could be materially adversely affected.
We may be required to sell digital assets to fund operations, meet obligations, or respond to market conditions, which could result in realized losses and adversely affect our financial condition and results of operations.
We may, from time to time, sell digital assets to fund operations, meet obligations, manage liquidity, satisfy margin or collateral requirements, repay borrowings, or respond to adverse market conditions. We do not have a formal policy governing the timing, amount, or circumstances of digital asset sales, and such decisions are made by management based on operational needs, market conditions, and other factors. If we sell digital assets during periods of unfavorable market conditions or declining prices, we may incur realized losses that could materially reduce our net income or increase our net loss. In addition, sales of digital assets reduce the amount of assets available to support our revenue-generating activities, including staking, block building, and DeFi deployments, which could reduce future revenues.
We may also be required to sell digital assets at inopportune times to meet financial obligations, including obligations under our Senior Convertible Notes or DeFi borrowing arrangements. For example, if we experience a liquidity shortfall, a DeFi liquidation event, or an acceleration of amounts owed under our Senior Convertible Notes, we may be forced to sell digital assets rapidly and at unfavorable prices to satisfy such obligations. Forced sales during periods of market stress could result in significant realized losses and could further impair our liquidity and financial condition.
Digital asset market disruptions, exchange failures, or loss of liquidity could impair our ability to access or convert digital assets.
Digital asset markets may experience disruptions, reduced liquidity, operational failures, or insolvencies of centralized exchanges or other market participants. Such events could limit our ability to convert digital assets into cash or stablecoins, impair our ability to manage collateral, and materially adversely affect our liquidity.
Risks Related to Validator Node Operations (NodeOps)
Our validator node operations, including operations through pooled staking protocols, depend on reliable infrastructure, may be subject to reduced rewards, penalties, or slashing.
Validator node operations require continuous uptime, accurate performance, and secure infrastructure. If our validator nodes fail to perform properly due to software errors, misconfiguration, infrastructure outages, cybersecurity incidents, or other disruptions, we may earn reduced staking rewards and could be subject to penalties or slashing.
Slashing is a protocol-level penalty mechanism that can result in the loss of a portion of staked ETH. Any slashing event could result in a loss of digital assets and harm our business and reputation.
Risks related to our validator node operations through pooled staking protocols such as Rocket Pool could adversely affect our business, results of operations, and financial condition.
A portion of our validator node operations are conducted through pooled staking protocols, including Rocket Pool, where we contribute a portion of the ETH required to activate a validator and the remaining ETH is provided through protocol smart contracts funded by third-party participants. This operating structure exposes us to additional risks beyond traditional self-funded validator operations, including risks associated with smart contract performance, protocol design, and the actions of third-party participants.
If Rocket Pool or similar protocols experience smart contract vulnerabilities, governance changes, operational failures, liquidity constraints, or other disruptions, our ability to operate validator nodes, earn staking rewards, or access staked ETH may be adversely impacted. Changes to protocol parameters, incentive structures, or validator selection mechanics could reduce the profitability of these operations or increase the risks associated with participation. Because these protocols operate through autonomous smart contracts and decentralized governance, we may have limited ability to influence outcomes or mitigate losses in the event of protocol failure.
Changes to Ethereum staking economics, validator requirements, or protocol rules could reduce our staking revenues.
Ethereum protocol upgrades or changes may affect staking reward rates, validator requirements, penalties, withdrawal mechanics, minimum staking amounts, or other economic factors. The Ethereum community and core developers periodically implement protocol upgrades through a governance process that we do not control. Such changes could reduce the profitability of our validator operations, increase operational complexity, require additional capital investment, or materially adversely affect our results. In addition, future protocol changes could alter the competitive dynamics among validators or introduce new requirements that favor certain types of participants over others.
Staked ETH may be subject to withdrawal delays or other constraints that could adversely affect liquidity.
ETH staked in validator operations may be subject to protocol-level withdrawal queues, exit delays, or other technical constraints. During periods of network congestion or market stress, we may be unable to withdraw staked ETH in a timely manner, which could adversely affect liquidity and our ability to respond to market conditions.
Risks Related to Block Building (Builder+), MEV, and Transaction Execution
Our Builder+ revenues depend on highly competitive and rapidly evolving transaction execution markets.
Block building is a highly competitive activity where builders compete to assemble and submit optimized blocks. Our ability to earn revenue through Builder+ depends on our technology, infrastructure performance, latency, algorithm optimization, and our ability to consistently construct blocks selected by validators. The block-building market is characterized by rapid technological change, and competitors may deploy advanced algorithms, artificial intelligence, machine learning, or other technologies that improve their competitive position relative to ours. If we are unable to keep pace with technological developments or maintain competitive infrastructure performance, our block inclusion rates and revenues could decline.
Competitive dynamics may change rapidly, and we may be unable to maintain or improve our position. Increased competition may reduce margins, reduce block inclusion rates, or require increased payments to validators or other participants.
Our Builder+ operations depend on the continued functioning and adoption of the broader block-building and MEV relay ecosystem, and disruptions to that ecosystem could materially reduce our revenues.
Our block-building operations depend on the continued functioning of Ethereum’s proposer-builder separation (PBS) architecture and the related ecosystem of relays, validators, and transaction sources. The builder ecosystem is highly competitive and relies on third-party participants, including relays and validators, to transmit blocks and include them on-chain.
If relays, validators, or other critical participants modify their policies, restrict access, experience outages, impose additional requirements, or discontinue support for certain builders, our ability to deliver blocks competitively and generate execution-layer rewards may be adversely affected. In addition, changes in Ethereum protocol rules, validator behavior, relay concentration, or market structure could change the economics of block building or limit the effectiveness of our strategies.
Because block building is a rapidly evolving market, the continued viability of our Builder+ operations depends in part on factors outside of our control, and adverse developments could materially reduce revenues and operating results.
Changes to the Ethereum protocol could adversely affect the economics of our Builder+ operations.
Ethereum’s protocol continues to evolve through periodic upgrades and design changes that may affect transaction execution, block construction, validator behavior, and the distribution of rewards within the network. Future protocol upgrades or changes to Ethereum’s transaction processing or block construction mechanisms could reduce block-building opportunities, alter the availability or distribution of transaction fees and other block-related revenues, or otherwise materially change the economics of our Builder+ operations. Any such changes could adversely affect our revenues and operating results.
Our block-building activities may be subject to reputational risks, regulatory scrutiny, and evolving market norms.
Block building involves determining the order in which transactions are included in a block before submitting it to the network. In some cases, the ordering or selection of transactions may allow builders to capture additional transaction-related value. Certain participants in the blockchain ecosystem view some of these practices as controversial or potentially unfair. As a result, regulators, network participants, or other stakeholders may increase scrutiny of block-building activities or advocate for changes to market practices or protocol rules. If our block-building activities are perceived negatively or become subject to regulatory action or changing industry norms, our reputation, relationships with ecosystem participants, and ability to operate could be adversely affected.
Risks Related to DeFi Operations (Imperium), Smart Contracts, and Protocol Participation
Our participation in DeFi protocols and pooled staking arrangements exposes us to smart contract risk, oracle risk, governance risk, and protocol failure risk, which could result in the loss of digital assets.
Our operations involve deploying digital assets into decentralized finance protocols and pooled staking arrangements that rely on smart contracts to facilitate lending, borrowing, liquidity provision, staking, and other on-chain activities. Smart contracts may contain coding errors, vulnerabilities, or design flaws that could be exploited by malicious actors or result in unintended outcomes. Although we seek to deploy assets only to protocols that have undergone third-party security audits, such audits do not guarantee the absence of vulnerabilities, and previously audited protocols have experienced exploits resulting in significant losses. In addition, DeFi protocols and pooled staking arrangements may be subject to governance decisions, parameter changes, or upgrades that adversely affect revenue, liquidity, or the ability to withdraw assets. We may have limited or no ability to reverse transactions, recover assets, or seek recourse in the event of a smart contract exploit or protocol failure.
DeFi protocols and pooled staking arrangements may also experience oracle failures, liquidity shocks, or cascading liquidations that impair the functioning of the protocol or result in losses. DeFi lending protocols rely on price oracles and automated smart contract mechanisms, and oracle failures, manipulation, or delays could trigger liquidations or mispricing. If a protocol in which we participate experiences a failure, exploit, or other adverse event, we may lose some or all of the digital assets deployed in that protocol, which could materially adversely affect our financial condition and results of operations.
DeFi revenue is variable, may decline, and may not be sustainable.
Revenue generated through DeFi protocols are variable and depend on market conditions, protocol utilization, interest rates, liquidity, and participant behavior. Revenue may decline as additional capital enters protocols, as protocol economics change, or as market demand shifts.
DeFi protocols may change their rules, parameters, or governance decisions in ways that adversely affect our revenue.
Many DeFi protocols are governed by decentralized governance mechanisms. Governance decisions may change protocol parameters, economics, collateral requirements, supported assets, or other features. Such changes could reduce revenue, increase risk, or result in adverse outcomes.
Risks Related to ETH-Backed DeFi Borrowing, Leverage, and Liquidation
Our ETH-backed borrowings through DeFi protocols subject us to liquidation risk and declines in ETH prices or adverse protocol conditions could result in forcedliquidations, material losses, and potential defaults under our Senior Convertible Notes.
We have utilized decentralized finance protocols, including Aave, to borrow stablecoins collateralized by ETH. These borrowings are governed by smart contracts that require collateralization levels to be maintained above specified thresholds. Our outstanding borrowings through Aave currently exceed the limited exception provided under the terms of our Senior Secured Convertible Promissory Notes (the “Senior Convertible Notes”) for up to $750,000 of Aave borrowings. If the value of ETH declines, market volatility increases, borrowing rates rise, or protocol-level parameters change, our collateral ratios may deteriorate.
If our collateral ratios fall below required thresholds, the protocol may automatically liquidate a portion of our posted ETH collateral. Such liquidations may occur rapidly and without our consent, potentially at unfavorable prices, and may result in realized losses, reduced ETH holdings, reduced liquidity, or adverse impacts to our ability to operate and scale our business. In addition, periods of extreme market volatility or network congestion may impair our ability to add collateral, repay borrowings, or otherwise manage positions in a timely manner. Because liquidation mechanics are executed through automated smart contracts and market-based liquidators, the timing and extent of liquidation events may be difficult to predict or prevent.
A default or liquidation event related to our DeFi borrowings could constitute an “Event of Default” under the Senior Convertible Notes. This risk is compounded by ETH price volatility, as a significant decline in ETH prices could simultaneously trigger DeFi liquidations and an Event of Default under the Senior Convertible Notes, resulting in cascading adverse effects on our liquidity and financial condition. Upon an Event of Default, the holders of the Notes may exercise remedies available under the Notes and related financing documents, including acceleration of amounts owed and enforcement of security interests. Any such actions could materially and adversely affect our liquidity, financial condition, and results of operations.
Variable interest rates and protocol-level changes may increase our cost of capital.
Interest rates in DeFi lending protocols are variable and may change rapidly based on utilization and liquidity. Protocol changes or market conditions could increase borrowing costs and reduce the economic attractiveness of borrowing strategies.
Risks Related to Capital Markets, Financing Strategy, and Dilution
Our ability to raise capital may be limited, and we may need additional capital to execute our strategy.
Our growth strategy, including the expansion of our validator node operations, block-building activities, and DeFi deployments, may require additional capital beyond our current resources and cash flows from operations. We may also require additional capital to fund operating losses, respond to competitive pressures, pursue strategic acquisitions or investments, develop new products or services, or respond to unanticipatedchallenges or opportunities. Our ability to raise capital through equity offerings, debt financing, or other means depends on numerous factors, many of which are beyond our control, including:
prevailing market conditions for equity and debt securities, including interest rates, credit spreads, and investor demand;
investor sentiment toward digital asset-related companies, which may be adversely affected by regulatory developments, market volatility, or high-profile failures of other industry participants;
our stock price, trading volume, and market capitalization, which affect the attractiveness and feasibility of equity offerings;
our financial condition, results of operations, and the value of our digital asset holdings;
covenants and restrictions under our existing financing arrangements, including the Senior Convertible Notes;
our ability to maintain our listing on Nasdaq and comply with applicable listing standards; and
regulatory developments affecting digital asset companies, capital markets, or our specific business activities.
If we are unable to raise additional capital when needed, or if capital is only available on terms that are highly dilutive, restrictive, or otherwise unfavorable, we may be required to significantly reduce or delay our growth initiatives, curtail operations, sell digital assets at unfavorable prices, or pursue strategic alternatives, any of which could materially adversely affect our business, financial condition, and results of operations. In addition, our inability to raise capital could limit our ability to respond to competitive pressures or pursue strategic opportunities, which could weaken our competitive position over time.
Our business depends on access to banking services and financial infrastructure and the loss of banking relationships could materially adversely affect our business.
Our operations depend on continued access to banking services, payment processing, and traditional financial infrastructure. Financial institutions may be unwilling to provide services to companies engaged in digital asset activities due to regulatory uncertainty, compliance costs, reputational concerns, or internal risk management policies. Some digital asset companies have experienced the sudden termination or restriction of banking relationships, and there can be no assurance that our current banking relationships will continue or that we will be able to establish new banking relationships on acceptable terms. The loss of banking services could impair our ability to receive or make payments, manage liquidity, pay vendors and employees, access capital markets, or conduct ordinary business operations. In addition, regulatory guidance or informal pressure on financial institutions regarding digital asset customers could further limit our access to banking and financial services.
Sales of our common stock through our ATM program or other offerings may result in substantial dilution to existing shareholders.
We have established an at-the-market (“ATM”) offering program under which we may sell shares of our common stock from time to time at prevailing market prices. Sales under the ATM program, or the perception that such sales may occur, could adversely affect the market price of our common stock and result in significant dilution to existing shareholders. Because ATM sales are made at market prices without a fixed discount, the dilutive effect on existing shareholders depends on the prices at which shares are sold and the volume of shares sold over time. We have discretion to determine the timing and amount of any sales under the ATM program, and shareholders will not have advance notice of when or whether sales will occur.
In addition, we may issue additional shares of common stock or securities convertible into or exchangeable for common stock in connection with future financings, acquisitions, employee compensation, or other purposes. Any such issuances would further dilute the ownership interests of existing shareholders and could adversely affect the market price of our common stock. We may also issue securities with rights, preferences, or privileges senior to those of our common stock, which could adversely affect the rights of common stockholders.
Our Senior Convertible Notes may result in dilution and contain provisions that may adversely affect shareholders.
We have issued Senior Convertible Notes. Conversion of these notes could result in dilution to existing shareholders. The Senior Convertible Notes also include provisions that may affect our capital structure, liquidity, and financial flexibility.
In addition, the Senior Convertible Notes and related financing documents contain affirmative and negative covenants and other provisions that may restrict our ability to incur additional indebtedness, grant liens, make certain distributions, transfer assets, or otherwise engage in certain transactions without the consent of the noteholder. These provisions may limit our ability to pursue strategic transactions, obtain additional financing, manage our capital structure, or respond to changes in market conditions.
Our share repurchase program may not enhance shareholder value and may reduce liquidity.
Our share repurchase program is discretionary and may be modified, suspended, or discontinued. Repurchases may reduce liquidity available for operations and growth and may not increase shareholder value.
Risks Related to Cybersecurity, Custody, and Digital Asset Security
If we experience a cybersecurity incident, theft, loss of private keys, or compromise of wallet controls, we could lose digital assets and suffer significant harm.
Digital assets are controlled through cryptographic private keys and are subject to theft, loss, unauthorized access, and cybersecurity risks. If we lose access to private keys, experience a compromise of wallet infrastructure or access controls, or suffer a cybersecurity breach affecting our systems or those of our service providers, we may lose some or all of our digital assets. Such losses could be immediate, irreversible, and unrecoverable. The security of digital assets depends on the continued integrity of our private key management practices, including the use of multi-signature authorization, hardware security modules, cold storage, and access control procedures. A failure in any of these safeguards, whether due to human error, insider threat, social engineering, technical malfunction, or external attack, could result in the permanent loss of digital assets.
In addition, our ability to respond to and recover from a cybersecurity incident depends on our incident response capabilities, business continuity planning, and the effectiveness of our security monitoring and detection systems. If we fail to detect, contain, or remediate a security incident in a timely manner, the scope and magnitude of losses could be significantly greater. We may also be required to expend significant resources to investigate and remediate any security incident, implement additional protective measures, and address any resulting regulatory inquiries, litigation, or reputational harm.
We rely on third-party vendors, service providers, and infrastructure providers, and disruptions or failures involving these third parties could materially adversely affect our business.
We rely on third-party vendors and service providers to support certain aspects of our operations, including cloud hosting and infrastructure, digital asset wallet infrastructure, access controls, transaction signing, transaction workflows, software and security tooling, professional services, and other operational functions. These providers may have access to or control over components of our security infrastructure, and we depend on their continued performance, security practices, and operational reliability. While we seek to select reputable providers and implement safeguards, we do not control these third parties and may not be able to ensure their continued performance, reliability, security, or compliance with applicable laws. We may have limited visibility into, or control over, the security practices and internal controls of our third-party providers, and we cannot guarantee that their systems will remain secure or that they will meet their contractual obligations.
Disruptions, outages, performance degradation, cybersecurity incidents, security breaches, service interruptions, or other failures by third-party providers could impair our ability to operate validator nodes, block-building infrastructure, and DeFi activities, and could adversely affect our ability to access, safeguard, or transfer digital assets. Such failures could result in lost revenues, increased costs, reputational harm, and potential regulatory scrutiny. In addition, if a third-party provider experiences financial distress, service termination, or operational constraints, we may be required to transition services to an alternative provider, which could be costly, time-consuming, and disruptive. Certain services may also be difficult to replace in the short term, and alternative providers may not be available on favorable terms, if at all.
We do not maintain insurance coverage for losses of digital assets.
We do not maintain any insurance policies that would compensate us for the loss of any digital assets. Insurance coverage for digital asset losses is limited in availability, may be prohibitively expensive, and may not cover all potential loss scenarios. Accordingly, if our digital assets are lost, stolen, or otherwise compromised for any reason, we would bear the full economic loss, which could materially and adversely affect our financial condition, liquidity, and results of operations. In addition, even if we had insurance coverage in the future, policy terms, exclusions, coverage limits, or claim disputes could limit our ability to recover losses.
Risks Related to Regulation, Legal Uncertainty, and Government Oversight
The regulatory landscape for digital assets, blockchain infrastructure, DeFi, and related activities is rapidly evolving, and regulatory developments could materially adversely affect our business.
The legal and regulatory environment for digital assets, blockchain networks, DeFi protocols, and related activities remains uncertain and continues to evolve in the United States and internationally. Federal, state, and foreign regulators have taken and may continue to take actions that could materially affect the development, adoption, and use of digital assets and blockchain technologies.
Regulatory agencies, including the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), the Financial Crimes Enforcement Network (“FinCEN”), the Office of Foreign Assets Control (“OFAC”), the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”), state financial regulators, and foreign regulatory bodies have asserted or may assert jurisdiction over aspects of the digital asset ecosystem.
Changes in laws, regulations, enforcement priorities, or regulatory interpretations could adversely affect our ability to operate our business, access capital, deploy digital assets, participate in DeFi protocols, engage in block building, or conduct validator operations. Regulatory outcomes could also increase our compliance costs, require us to modify or terminate certain activities, or subject us to civil or criminal liability.
Digital assets, including ETH, are subject to evolving and uncertain regulatory classifications, and adverse regulatory developments, including classification of digital assets as securities or classification of the Company as an investment company under the Investment Company Act of 1940, could materially adversely affect our business.
Digital assets are subject to evolving and uncertain regulatory treatment under U.S. federal securities laws, commodities laws, and other regulatory frameworks. ETH, the primary digital asset we hold and use in our operations, is generally treated as a commodity for regulatory purposes, including by the CFTC and in connection with certain exchange-traded products approved by the SEC. However, the regulatory classification of digital assets remains unsettled and subject to ongoing debate among regulators, legislators, and market participants. The classification of any particular digital asset may change as a result of new legislation, regulatory rulemaking, enforcement actions, court decisions, or evolving interpretations by the SEC, CFTC, or other regulatory authorities.
If ETH or other digital assets that we hold, earn, or deploy were to be reclassified as securities, we and other ecosystem participants could become subject to significant regulatory requirements. Such requirements could include registration of digital assets as securities, registration as a broker-dealer or securities exchange, compliance with disclosure and reporting obligations, restrictions on trading and transferability, and limitations on who may purchase, hold, or transact in such assets. Any such determination could significantly reduce the liquidity, utility, and market value of ETH and other digital assets, disrupt our operations, and materially adversely affect our business and financial condition. In addition, if we were found to have violated securities laws by holding, transacting in, or facilitating transactions in unregistered securities, we could be subject to enforcement actions, penalties, disgorgement, and other remedies.
In addition, if certain digital assets or related instruments we hold or obtain through our operations were deemed “securities,” we could be deemed an “investment company” under the Investment Company Act of 1940 (the “Investment Company Act”). Under the Investment Company Act, a company may be deemed an investment company if it is engaged primarily in the business of investing, reinvesting, owning, holding, or trading in securities, or if investment securities comprise a significant portion of its assets.
If we were deemed to be an investment company, we would be required to register under the Investment Company Act, which would subject us to extensive and burdensome regulatory requirements, including restrictions on our capital structure, limitations on our ability to issue debt and equity securities, prohibitions or restrictions on transactions with affiliates, requirements regarding the composition and independence of our board of directors, custody requirements, and extensive compliance, reporting, and recordkeeping obligations. Registration as an investment company could fundamentally change our business model and make it impractical to continue our current operations. If we failed to register when required, we could be subject to SEC enforcement action, including injunctive relief, and could be prohibited from engaging in certain business activities. In addition, contracts entered into by an unregistered investment company may be voidable, and a court could appoint a receiver to take control of the company.
Our validator node operations, block-building activities, and DeFi participation may be subject to increased regulatory scrutiny and could be deemed to involve regulated activities.
Our operations involve participation in blockchain networks and DeFi protocols, including staking, block building, and digital asset deployments. Regulators may view certain of these activities as involving regulated financial services, including, without limitation, securities transactions, commodities transactions, investment contracts, swaps, lending, brokerage, exchange activity, clearing activity, custody, money transmission, or other regulated activities.
For example, regulatory authorities may assert that certain DeFi protocols operate as unregistered exchanges, broker-dealers, clearing agencies, or other regulated entities, or that participants in such protocols, including liquidity providers or borrowers, may be subject to regulatory obligations.
Similarly, regulators may scrutinize block-building activities or transaction execution markets. Regulatory action could require us to modify or cease certain activities, could reduce the profitability of our operations, and could expose us to enforcement actions.
Regulatory actions, enforcement proceedings, or legal restrictions affecting third parties and protocols we rely on could materially adversely affect our business.
In addition to the direct regulatory risks described above, our operations depend on the continued functionality, accessibility, and participation of third parties and decentralized protocols across the digital asset ecosystem. These include blockchain networks, DeFi protocols, stablecoin ecosystems, centralized exchanges and liquidity venues, custody and wallet infrastructure providers, and participants in Ethereum transaction execution markets, including validator and block-building infrastructure.
Governmental authorities have brought, and may continue to bring, enforcement actions and pursue regulatory initiatives involving digital assets, staking and validation activities, DeFi protocols, stablecoin issuers, crypto exchanges, custodians, wallet providers, and other ecosystem participants. Even if we believe our operations are conducted in compliance with applicable law, regulatory actions, restrictions, or adverse legal developments directed at third parties or protocols we rely on could materially disrupt our operations, reduce liquidity, restrict our ability to deploy or redeploy digital assets, increase compliance costs, reduce transaction flow or execution opportunities, or otherwise materially adversely affect our business, financial condition, and results of operations.
In addition, because portions of the digital asset ecosystem are decentralized, open-source, and not operated by a single identifiable entity, regulatory actions may result in indirect impacts, including reduced protocol participation, decreased liquidity, market fragmentation, changes in protocol governance or access policies, or the withdrawal of service providers. The occurrence of any of these events could materially adversely affect our ability to operate and scale our validator operations, block-building operations, and DeFi activities.
Regulatory authorities may take enforcement actions or adopt rules that could materially adversely affect our operations.
U.S. and international regulators, including the SEC, the CFTC, and other governmental authorities, continue to evaluate and develop regulatory frameworks applicable to digital assets, blockchain infrastructure, and decentralized finance activities. These regulators have broad authority to investigate and bring enforcement actions relating to digital asset markets and blockchain-based activities.
Even if we believe that we are operating in compliance with applicable laws and regulations, we may become subject to investigations, subpoenas, enforcement actions, litigation, or administrative proceedings related to our digital asset holdings, validator operations, block-building activities, or other aspects of our business. Regulatory authorities may also adopt new rules or interpretations that impose additional compliance requirements or restrictions on participants in the digital asset ecosystem.
Any such investigations, enforcement actions, or regulatory developments could result in significant legal costs, reputational harm, penalties, fines, injunctions, operational restrictions, or other adverse outcomes that could materially and adversely affect our business, financial condition, and results of operations.
Regulatory requirements related to anti-money laundering (“AML”), sanctions, and financial crime compliance could adversely affect our business.
Regulators may impose or expand AML, know-your-customer (“KYC”), sanctions, and other financial crime compliance requirements on digital asset activities. OFAC has issued sanctions-related guidance applicable to certain blockchain activities, and additional sanctions designations could impact DeFi protocols, relays, validators, or other ecosystem participants.
Although our operations are primarily non-custodial, regulators may nonetheless assert that certain activities require compliance obligations. If we are required to implement additional compliance measures, our costs may increase, and we may be required to restrict or cease certain activities.
We may be subject to state money transmission laws or other licensing requirements.
Certain state laws regulate money transmission and similar activities. State regulators have actively pursued enforcement actions against digital asset businesses and may interpret money transmission and similar laws broadly in the context of digital assets. If our activities were deemed to involve money transmission or similar regulated activity, we could be required to obtain licenses in multiple jurisdictions, comply with bonding requirements, maintain minimum net capital, implement compliance programs, submit to examinations, or restrict or cease certain operations. The cost of obtaining and maintaining state licenses, if required, could be substantial, and failure to comply with applicable state laws could result in civil or criminalpenalties, enforcement actions, or reputational harm.
Regulation of stablecoins could materially adversely affect our DeFi activities.
Stablecoins play a significant role in DeFi ecosystems, including as collateral, as a medium of exchange, and as a source of liquidity for lending and borrowing protocols. Our DeFi operations, including our ETH-backed borrowings through Aave, involve stablecoins such as USDC and USDT. Stablecoins are designed to maintain a stable value relative to a reference asset, typically the U.S. dollar, but there is no guarantee that any stablecoin will maintain its peg. Stablecoins have experienced depegging events in the past, including significant disruptions affecting major stablecoins, and such events could recur. A depegging event affecting stablecoins we hold or use could result in immediate losses, impair our ability to manage collateral or repay borrowings, and adversely affect our liquidity and financial condition.
If stablecoin regulation results in reduced availability, liquidity disruptions, restrictions on stablecoin usage, or prohibitions on certain stablecoins, our DeFi operations and borrowing activities could be materially adversely affected. For example, if stablecoins we use were prohibited, restricted, or deemed non-compliant with regulatory requirements, we may be required to transition to alternative stablecoins, which may have different risk profiles, liquidity characteristics, or protocol support. In addition, regulatory actions against stablecoin issuers, exchanges, or DeFi protocols that support stablecoins could disrupt the broader stablecoin ecosystem and adversely affect our ability to conduct DeFi operations. The occurrence of any of these events could materially and adversely affect our business, financial condition, and results of operations.
Tax laws and reporting requirements related to digital assets are evolving and could adversely affect our business.
Tax treatment of digital assets is complex and evolving. Changes in tax laws, IRS guidance, reporting requirements, or interpretations could increase our tax liabilities, impose additional reporting burdens, or affect the economics of our operations.
Accounting standards, SEC disclosure expectations, and audit practices for digital assets may evolve and could materially adversely affect our reporting obligations.
Accounting and disclosure requirements for digital assets, DeFi activities, and blockchain infrastructure operations continue to evolve. The SEC has issued and may continue to issue guidance or comment letters related to digital asset disclosures, custody practices, risk factors, revenue recognition, and other matters.
Changes in accounting standards, audit practices, or SEC expectations could increase our compliance costs, require additional disclosures, or affect our reported financial results.
International regulatory developments could adversely affect our business.
We may be affected by regulatory developments outside the United States. Foreign jurisdictions have adopted and may continue to adopt regulations restricting digital asset activities, imposing licensing requirements, or limiting access to DeFi protocols. Jurisdictions, including but not limited to the United Kingdom, Singapore, Hong Kong, and various other countries, have adopted or are developing their own regulatory frameworks for digital assets. If we seek to expand operations internationally or if our activities are deemed subject to foreign regulatory requirements, we may face significant compliance costs, licensing requirements, operational restrictions, or prohibitions that could materially limit our ability to operate or expand. In addition, international regulatory fragmentation could affect global market conditions, liquidity, and the value of digital assets.
Risks Related to Our Public Company Status, Internal Controls, and Reporting
We face increased financial reporting and internal control risks due to the complexity of our operations, and any failure to maintain effective internal control over financial reporting could adversely affect our business.
Our financial reporting requires significant judgment and estimation, particularly with respect to accounting for digital assets, DeFi borrowings, fair value measurements, revenue recognition related to blockchain infrastructure activity, non-cash validator payments, and equity-linked financing instruments such as convertible notes and warrants. These areas involve evolving accounting interpretations and may require complex valuation methodologies.
As our operations scale and become more complex, including through expanded DeFi activity and capital markets transactions, we may face increased risk of accounting errors, control deficiencies, or delays in financial reporting. In addition, because we operate with a relatively small management and finance team, our ability to maintain appropriate segregation of duties and control coverage may be constrained. If we are unable to maintain effective internal control over financial reporting, we may be unable to accurately report our financial results, comply with SEC reporting requirements, or prevent fraud. Any such failure could result in material misstatements, restatements, regulatory actions, loss of investor confidence, and could materially adversely affect the market price of our securities.
Our stock price may be volatile, and investors may lose all or part of their investment.
The market price of our common stock has experienced significant volatility and may continue to be volatile. The trading price of our common stock may be influenced by a number of factors, many of which are beyond our control, including:
fluctuations in the market price of ETH, Bitcoin, and other digital assets, which may affect investor perception of our company regardless of our actual exposure to such assets;
changes in market sentiment toward digital asset-related companies, blockchain technology, or the cryptocurrency industry generally, including as a result of negative publicity, regulatory developments, or high-profile failures of other industry participants;
our actual or anticipated operating results, financial condition, and liquidity, including any failure to meet revenue, earnings, or other guidance or expectations;
announcements regarding our business, strategy, digital asset holdings, DeFi activities, or capital allocation decisions, including any announcements regarding purchases, sales, or impairments of digital assets;
the timing, size, and perceived dilutive effect of capital markets transactions, including sales under our at-the-market offering program or conversion of our Senior Convertible Notes;
short selling activity, trading volume fluctuations, and the availability of shares for borrowing, which may increase volatility and create downward pressure on our stock price;
activity on social media platforms, online forums, and other channels that may cause significant volatility in our stock price unrelated to our operating performance or financial condition;
the initiation, modification, or cessation of research coverage by securities analysts, or changes in analysts’ estimates or recommendations regarding our company or the digital asset industry;
the inclusion or exclusion of our common stock from market indices, exchange-traded funds, or other investment products that track digital asset-related companies;
regulatory developments, enforcement actions, or litigation affecting us, other digital asset companies, or the industry generally;
cybersecurity incidents, digital asset thefts, or operational failures, whether affecting us or other industry participants;
macroeconomic conditions, including inflation, interest rates, recessionconcerns, and geopolitical events, which may affect risk appetite for digital asset-related investments; and
general market conditions and overall fluctuations in U.S. equity markets.
Because our business and strategy involve digital assets and blockchain-based operations, our stock price may be disproportionately affected by market developments in the digital asset industry relative to companies in other sectors. In addition, our relatively small public float and market capitalization may contribute to increased volatility and reduced liquidity in our common stock, making it more susceptible to significant price swings from relatively small changes in trading volume or investor sentiment. Securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and attention of management, and adversely affect our business. Volatility in our stock price could cause investors to lose all or part of their investment.
Risks Related to Intellectual Property, Personnel, and Operations
We depend on key personnel, and the loss of key personnel could harm our business.
Our success depends in significant part on the continued services of our key management, engineering, and operational personnel, including our Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, and other members of senior management and technical leadership. Our business requires specialized expertise in blockchain infrastructure, validator operations, block building, DeFi protocol participation, and digital asset custody and security. Competition for qualified personnel with these skillsets is intense, and we may not be able to attract, retain, and motivate key personnel on commercially reasonable terms.
If we lose the services of key personnel, including members of senior management or critical technical staff, we may experience disruptions in operations, delays in executing our strategic initiatives, reduced ability to develop or improve our infrastructure, and difficulties maintaining performance, security, and reliability across our operations. In addition, the loss of key personnel could result in the loss of institutional knowledge and could adversely affect relationships with counterparties, service providers, and strategic partners.
Our future success also depends on our ability to effectively manage and integrate new personnel as we scale operations. If we are unable to hire, retain, or effectively manage qualified personnel, our business, financial condition, and results of operations could be materially adversely affected.
Risks Related to Litigation
We may be subject to litigation, regulatory proceedings, and other legal actions, which could result in significant costs and adversely affect our business.
We are subject to the risk of litigation and regulatory proceedings in the ordinary course of business. These matters may include, among others, securities litigation, shareholder derivative actions, employment-related claims, intellectual property disputes, contractual disputes, and claims related to our digital asset activities. We may also be subject to investigations, inquiries, or enforcement actions by regulatory authorities relating to digital assets, blockchain infrastructure, DeFi participation, disclosures, or other matters.
Litigation and regulatory proceedings can be costly, time-consuming, and disruptive to management and operations, regardless of outcome. Adverse judgments, settlements, fines, penalties, or other outcomes could result in significant monetary damages, injunctive relief, reputational harm, restrictions on our operations, or other consequences that could materially adversely affect our business, financial condition, and results of operations.
In addition, the evolving regulatory environment for digital assets increases the risk of regulatory inquiries and enforcement actions, including in circumstances where regulatory expectations or interpretations change over time.
