Original title: (SBET has risen over 95% in 5 days, how long can the ETH flywheel last?) Original source: Biteye
@SharpLinkGaming, originally a small-cap Nasdaq stock with a market value of only about $10 million, has seen its stock price surge over 200% in the past month! The key driving force behind this price surge is a strategy centered around the 'flywheel effect' of ETH.
So, what exactly is SBET's 'ETH Flywheel' model? Can this round of ETH price increase lead to a new bull market? This tweet addresses your questions:
1. Analyzing the 'ETH Flywheel' behind the rise of SBET
The surge in SBET (SharpLink Gaming) stems from its multiple purchases of ETH, becoming a new player behind ETH. In simple terms, the company has established a self-reinforcing capital flywheel using ETH: financing via stock sales to buy ETH - boosting stock prices through ETH market trends and narrative effects - then financing to buy more ETH at higher valuations, continuously cycling to grow asset size.
Breaking it down, this flywheel consists of three steps:
(1) Low-cost financing to purchase coins: In May this year, ConsenSys, founded by Ethereum co-founder Joe Lubin, along with other crypto venture capitalists, participated in a PIPE private placement for SBET at a price of $6.15 per share, injecting $425 million, allowing SBET to purchase approximately 163,000 ETH.
(2) Market enthusiasm drives up stock prices: With the narrative of the 'Ethereum Treasury', investors are flooding in, and SBET's stock price is rising rapidly; this psychological premium has led to a swift expansion of the company's market value.
(3) High valuation refinancing expands the balance sheet: A surge in stock price provides opportunities for further issuance. SBET can subsequently sell new shares at high prices to raise funds and buy more ETH, repeating this process to create a snowball effect.
As of today, SBET has purchased a total of 32,892 ETH (approximately $115 million), and as of now, SBET holds approximately 326,074 ETH, with a total value of about $1.14 billion. This position size has allowed SBET to surpass the Ethereum Foundation, becoming a new player in ETH, significantly increasing its market influence.
2. Review: From gambling marketing to Ethereum reserves, a 'battle of no return'
SBET's strategic transformation is not coincidental. According to its 2024 financial report, SharpLink Gaming's full-year revenue fell by 26.1% year-on-year, with weak growth in traditional gambling marketing business and pressure from losses prompting the company to seek new capital injection and diversified asset allocation.
Against this backdrop, SBET has turned its attention to blockchain, announcing in February this year the acquisition of a 10% stake in the UK blockchain online gambling company CryptoCasino, and later collaborating with ConsenSys in an attempt to break through its business with the 'Ethereum Reserve Strategy'.
So, why is the market optimistic about SBET's ETH reserves?
First, the 'productive asset' nature of ETH: Unlike Bitcoin's value storage attribute as 'digital gold', Ethereum has natural yield capabilities in staking and DeFi ecosystems, making holding it not just about waiting for its price to rise. Bitcoin lacks such native yield mechanisms and relies more on price fluctuations.
Secondly, filling the gap in traditional market ETH yield exposure: As of now, US regulators have not approved any ETH staking ETFs, which means traditional market investors find it difficult to access the staking yield layer of ETH directly. However, SBET is expected to fill this gap by operating protocol-based strategies through collaboration with ConsenSys and others, bringing considerable on-chain returns, possibly even surpassing future ETH staking ETFs' yields.
Finally, the higher implied volatility of ETH brings option value: Primitive Ventures believes that ETH's implied volatility (69) is significantly higher than BTC's (43), creating higher option value for convertible arbitrage and structured derivatives, leaving room for SBET to conduct more complex financial operations in the future.
3. How long can SBET's 'infinite bullets' last?
With the surge in stock prices, SBET's valuation has significantly exceeded the net value of its held crypto assets, resulting in a premium of up to several times the 'mNAV' (market value to net asset ratio). Currently, it is estimated that SBET's market value is about 3.92 times the market value of ETH in its treasury, indicating that investors are providing substantial narrative premium support.
Referencing Bitcoin treasury stock MicroStrategy, which reached about 4.5 times its market value/net asset ratio at the peak of its market, this also means that SBET's valuation model could potentially approach this level in an optimistic scenario. (Note: This comparative method may be affected by reflexivity; for reference only. @Joylou1209)
This proposes a new calculation approach, https://x.com/Joylou1209/status/1946070821883257040)
The calculation process in the figure below is based on the ETH already purchased, not on SBET's future expectations. If considering an additional 5 billion ATMs, the future estimation of SBET's mNAV can refer to: https://x.com/0x_RayBTC/status/1946103032267301322
At the same time, one must consider how long this flywheel model can continue.
On one hand, we discussed the core logic behind the current surge in SBET, which revolves around the 'flywheel effect' built around ETH; the key variable is the growth of 'ETH content per share = total ETH held by the company / total shares outstanding'.
Therefore, theoretically, if the increase in SBET's stock price > the increase in ETH price, this is the most favorable situation: the stock price rises quickly, allowing the company to finance more cash with fewer shares; the ETH price rises slowly, making it relatively cheap when buying. The result is that new financing buys more ETH, increasing the ETH content per share, accelerating the flywheel.
On the other hand, this model cannot continue indefinitely; the potential adjustment risks mainly include two points:
The growth rate of ETH per share is slowing: With the continuous expansion of total shares, even continuous purchases of ETH make it difficult to maintain a high growth rate of ETH concentration. Once the growth rate of ETH per share declines, market expectations for its future growth will weaken, and the valuation premium may fall accordingly.
Risk of ETH price correction: SBET's asset value highly depends on ETH, and if ETH's price corrects, the market's risk appetite will decline, leading to a revaluation of the valuation system, triggering a synchronous adjustment of stock prices. Especially in a downtrend, if SBET's decline > ETH's decline, the risk is greatest.
4. Outlook for ETH's future: Flywheel acceleration, the bull market is far from over?
The surge in SBET is essentially a pre-pricing of Ethereum's future value, and ETH's future performance will directly determine whether SBET's 'flywheel' can continue to turn. Here are some recent positive news about ETH for your reference:
1. The largest regulatory benefit and policy introduction in history: Last night, the US House of Representatives overwhelmingly passed three legislative drafts related to the regulation of cryptocurrencies such as stablecoins. Among them, the (GENIUS Act) provides a clear framework for stablecoin issuance, solidifying ETH's position as the infrastructure for stablecoins. Additionally, recent US court rulings have clarified that ETH is a commodity rather than a security, reducing regulatory uncertainty for ETH. This is critical - it means that the legal barriers for institutions investing in ETH are decreasing.
2. Institutional capital influx: As regulations become clearer, capital inflows into ETH trading products in the North American market are hitting new highs. Statistics show that on July 17 alone, the net inflow of US spot ETH ETFs reached $779.6 million, setting a new historical record. This also indicates a growing institutional demand for ETH allocation, with funds accelerating towards the ETH market.
3. The rapid advancement of Ethereum's Pectra upgrade roadmap: The Pectra upgrade (Prague + Electra hard fork) launched on May 7, 2025, raised the individual validator staking cap to 2048 ETH and recalibrated fees to significantly enhance Layer-2 throughput while supporting account abstraction. Vitalik Buterin and Ethereum core developers are also actively promoting gas limit increases and ZK integration, with ETH's TPS expected to break into the triple digits in the future.
4. Expectations of macroeconomic favorable conditions: With the US inflation rate falling, the market predicts that the Federal Reserve is likely to begin a rate-cutting process in 2025-2026. A decline in interest rates implies lower traditional risk-free yields, highlighting the relative attractiveness of ETH staking yields.
5. Conclusion
Regardless, ETH's strong fundamentals provide fuel and imagination space for SBET's market value, also determining the upper limit of SBET's valuation to some extent.
Currently, Ethereum is in a 'positive flywheel' with multiple favorable factors stacking up. The value of ETH as a 'productive asset' is being re-evaluated and priced by the market, with its on-chain revenue mechanism, scarcity, and future institutionalization process providing strong upward momentum.
Do you think this round of ETH price increase can support the start of a new bull market? Feel free to leave comments for discussion!
Risk Warning: Pay attention to the slowing growth rate of ETH per share and the risk of ETH price correction.
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