Polkadot ETF realized $4.52 of loss per $1 in staking rewards

On Friday, the 21Shares Polkadot ETF (TDOT) reported that it realized $4.52 of loss per share by selling Polkadot ($DOT) tokens to make each $1 per share of staking payouts last quarter.

The fund sold 98,505 $DOT last quarter to generate $107,510 of cash payments to shareholders. Those sales finalized losses of $485,553 due to the dramatic decline of $DOT.

Specifically, the price of $DOT declined 34% during Q2 2026. For the 12 months ending June 30, 2026, $DOT declined 76%.

TDOT shareholders do not actually receive staking rewards denominated in $DOT. Instead, the fund must sell $DOT to mimick and provide the corresponding staking rewards in USD for its shareholders.

All things considered, the payout is embarrassing. Holding TDOT from April through June this year entitled shareholders $0.146980 per share of payouts, which certainly did not compensate for the fund’s 34% share price decline from $14.95 to $9.86.

This is, of course, not any particular fault of 21Shares but rather the fault of $DOT itself, which continues to fall out of favor with investors.

$DOT was supposed to power parallelized execution capable of roughly 1 million transactions per second across up to 100 parachains, an ‘internet of blockchains’ with shared security, and seamless cross-chain interoperability.

In practice, total value locked across all parachains sits at less than $100 million, and $DOT trades near 97% below its all-time high as investors find more utility elsewhere.

Paying out staking rewards crystallizes $DOT losses

TDOT records cash payouts as a distribution of staking income. Nothing in the filing hides the mechanism by which it realized losses, and shareholders cannot interpret the cause of this $485,553 loss as unrelated to generating staking payouts.

Indeed, the trust unambiguously states, “Aggregate distributions of $107,510 or $0.146980 per share reduced the Trust’s $DOT holdings through the sale of $DOT to generate cash.”

That crystallized more than four dollars of permanent loss for every $1 it distributed.

By comparison, four peer crypto staking funds disclosed a realized loss in Q2, yet none lost more than $0.89 per $1 distributed. Respectively, Invesco’s Galaxy Solana fund realized $0.89 of loss, the same sponsor’s Solana fund disclosed $0.74 of loss, its Sui fund finalized $0.31, and BlackRock’s staked ether fund reported $0.25.

Realizing losses as Polkadot continues to crash

Shareholders, not these sponsors, bear those losses. The entities behind these funds make money running their products, regardless of the price of crypto.

Specifically, TDOT names 21Shares US LLC as the fund’s sponsor, wholly owned by 21co Holdings Limited. Crypto prime broker FalconX finished buying that parent in November 2025. CEO Russell Barlow and President Duncan Moir signed the quarterly report on August 14.

The trust’s original backer was the Web 3.0 Technologies Foundation, the Swiss entity behind Polkadot. It seeded the fund in January 2025 with $DOT worth about $53 million, or roughly $88 per share. Shares closed Q2 at $9.86 per share.

Sadly, selling $DOT to generate cash for staking reward payouts was not even the quarter’s most expensive liquidation. Instead, outright redemptions from investors who wanted out of the fund forced the trust to realize another $1.76 million of loss during the quarter.

Moreover, selling $DOT to pay its own ‘sponsor fee’ cost $253,417. Total realized losses for the quarter totaled $2.5 million.

The first distribution, $0.090846 per share, carried a May 14 record date and paid the next day. The second, $0.056134 per share, followed with a June 29 record date, a shrinking payout on a shrinking asset.

Both landed inside a quarter in which $DOT fell 34%. The coin slid from $1.25 on March 31 to $0.82 on June 30.

Competition is thinning rather than growing. Grayscale withdrew its own Polkadot ETF registration on August 7, and crypto ETF net asset values are down across the board since early 2025.