Bit Digital funded the majority-owned AI infrastructure company WhiteFiber without selling Ethereum or issuing new shares, but the route added a new dependency to its crypto treasury.
Galaxy Digital lent Bit Digital $50 million in a borrowing associated with 49,000 pledged LsETH, and Bit Digital separately became a lender to WhiteFiber.
The company said in its second-quarter results that it converted 73,235 ETH into 66,192 LsETH, the liquid-staking token it received in the exchange. It reported the pledged 49,000 LsETH as a $105.6 million digital-asset collateral receivable and retained 17,192 LsETH, worth $27.6 million, as a buffer against margin requirements.
Bit Digital drew the $50 million from Galaxy on May 20 at a 5.45% interest rate. The separate WhiteFiber delayed-draw facility started at $100 million and could rise to $150 million only by mutual written agreement.
LsETH is associated with Bit Digital’s company-level Galaxy borrowing. WhiteFiber’s facility is backed by a pledge of Enovum NC-1 Topco stock and a separate parent guaranty from White Fiber Operating Partnership.
Galaxy’s master loan agreement gives Bit Digital 24 hours after an ordinary margin-call notice to add collateral. If a required call is not met, Galaxy can partially liquidate collateral to restore the contractual level. A faster nine-hour procedure may apply if an urgent threshold is specified.
The public documents establish price-sensitive margin mechanics, but not Bit Digital’s proximity to a call or liquidation.
The impairment was an accounting hit, not a sale
The same quarterly release recorded a $46 million non-cash impairment on LsETH, and Bit Digital said it sold no ETH during the quarter. LsETH is carried at cost less impairment, unlike ETH’s fair-value treatment, so the charge was not a realized loss.
ETH staking revenue fell to $900,000 from $2.3 million in the first quarter, while net loss attributable to Bit Digital shareholders reached $107.2 million. The impairment was only one component of those results and does not indicate that the Galaxy loan breached a collateral threshold.
The financing preserved the ETH position and avoided immediate dilution, but it also made part of the treasury’s value relevant to WhiteFiber’s funding chain.
That trade-off is now part of a broader capital-allocation debate: CEO Sam Tabar said the board is evaluating share repurchases, subject to board and shareholder approval.
