SBET has risen over 95% in 5 days, how much longer can the ETH flywheel continue?

2025-07-19 12:18:37

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The sustainability of SBET's flywheel model depends on the growth rate of ETH per share and the risk of ETH price correction. Currently, SBET's valuation is significantly higher than the net value of its held crypto assets, indicating a certain premium.

Original Title: "SBET Surges Over 95% in 5 Days, How Long Can the ETH Flywheel Last?"
Original Source: Biteye

@SharpLinkGaming This Nasdaq small-cap stock, originally valued at only about $10 million, has seen its stock price soar over 200% in the past month! The key driving force behind this surge is a "flywheel effect" strategy centered around 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 provides the answers:

1. Analyzing the "ETH Flywheel" Behind SBET's Surge

The surge of SBET (SharpLink Gaming) stems from its repeated purchases of ETH, becoming a new player behind ETH. In simple terms, the company has established a self-reinforcing capital flywheel using ETH: buying ETH through stock financing - leveraging the ETH market and narrative effect to boost stock prices - then financing more ETH at a higher valuation, and repeating the cycle to continuously expand asset size.

Breaking it down, this flywheel consists of three steps:

(1) Low-cost fundraising to buy coins: In May this year, ConsenSys, led by Ethereum co-founder Joe Lubin, and other crypto venture capitalists participated in a PIPE private placement for SBET, injecting $425 million at a price of $6.15 per share, allowing SBET to purchase approximately 163,000 ETH.

(2) Market enthusiasm drives up stock prices: With the narrative of the "Ethereum treasury," investors flocked in, and SBET's stock price quickly climbed, creating a psychological premium that rapidly inflated the company's market value.

(3) High valuation refinancing to expand the balance sheet: The surge in stock price provided an opportunity for further issuance. SBET could then sell new shares at a high price to raise funds and buy more ETH, repeating this process to create a snowball effect.

Today, SBET has purchased a total of 32,892 ETH (approximately $115 million), and as of now, SBET holds about 326,074 ETH, with a total value of approximately $1.14 billion. This holding 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 "Desperate Battle"

SBET's strategic transformation is not coincidental. According to its 2024 financial report, SharpLink Gaming's annual revenue has decreased by 26.1%, with traditional gambling marketing business growth stagnating and loss pressures prompting the company to seek new capital injections and diversified asset allocations.

In this context, SBET 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 to attempt to break through its business with an "Ethereum reserve strategy."

So, why does the market have confidence in SBET's ETH reserves?

First, the "productive asset" nature of ETH: Unlike Bitcoin's value storage attribute as "digital gold," Ethereum possesses natural yield capabilities in staking and the DeFi ecosystem, meaning holding it is not just about waiting for its price to rise. Bitcoin lacks such native yield mechanisms and relies more on price fluctuations.

Second, filling the gap in traditional market ETH yield exposure: As of now, U.S. regulators have not approved any ETH staking ETFs, meaning traditional market investors find it difficult to access ETH staking yields directly. However, SBET is expected to operate protocol-based strategies in collaboration with ConsenSys, bringing substantial on-chain returns to fill this gap, potentially even surpassing future ETH staking ETF yields.

Finally, the option value brought by ETH's higher implied volatility: Primitive Ventures believes that ETH's implied volatility (69) is much higher than BTC's (43), creating greater option value for convertible arbitrage and structured derivatives. This leaves room for SBET to engage in more complex financial operations in the future.

3. How Long Can SBET's "Unlimited Ammo" Last?

As the stock price skyrockets, SBET's valuation has significantly exceeded the net value of its held crypto assets, resulting in a "mNAV" (market value to net asset) premium of several times. Currently, SBET's market value is estimated to be about 3.92 times the market value of the ETH in its treasury, indicating that investors are providing substantial narrative premium support.

In comparison, Bitcoin treasury stock MicroStrategy reached a market value/net asset ratio of about 4.5 times at the peak of the market. This also means that SBET's valuation model could still potentially approach upward in an optimistic scenario. (Note: This comparison method may be subject to reflexivity and is for reference only. @Joylou1209

A new calculation idea is proposed, https://x.com/Joylou1209/status/1946070821883257040)

The calculation process in the image below is based on the ETH already purchased and does not reflect SBET's future expectations. If considering an additional $5 billion ATM, SBET's future mNAV estimate can refer to: https://x.com/0x_RayBTC/status/1946103032267301322

At the same time, we must consider how long this flywheel model can continue.

On one hand, as discussed earlier, the core logic behind SBET's rise is its "flywheel effect" built around ETH, with the key variable being "per share ETH content = total ETH held by the company / total shares outstanding."

So, theoretically, if SBET's stock price increase > ETH price increase, this is the most favorable situation: the stock price rises quickly, allowing the company to raise more cash with fewer shares; if ETH's price rises slowly, it remains relatively cheap to buy. The result is that new financing buys more ETH, increasing per share ETH content, and accelerating the flywheel.

On the other hand, this model cannot continue indefinitely, and potential adjustment risks mainly include two points:

Slowing growth of per share ETH: As the total shares continue to expand, even with ongoing ETH purchases, it becomes difficult to maintain high growth in ETH concentration. Once the growth rate of per share ETH declines, market expectations for its future growth will weaken, and the valuation premium may subsequently decrease.

ETH price correction risk: SBET's asset value is highly dependent on ETH. If ETH's price corrects and market risk appetite declines, the valuation system will face redefinition, leading to a synchronous adjustment in stock prices. Especially in a downtrend, if SBET's decline > ETH's decline, the risk is maximized.

4. Outlook for ETH: Flywheel Accelerating, Bull Market Far from Over?

SBET's surge 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 regarding ETH for your reference:

The largest regulatory benefits and policies in history: Last night, the U.S. House of Representatives overwhelmingly passed three legislative proposals regarding the regulation of stablecoins and other cryptocurrencies. Among them, the "GENIUS Act" provides a clear framework for stablecoin issuance, solidifying ETH's position as the infrastructure for stablecoins. Additionally, a recent U.S. court ruling clarified that ETH is a commodity and not a security, reducing regulatory uncertainty regarding its "non-security" status. This is crucial—it means that legal barriers for institutions investing in ETH are decreasing.
Institutional capital inflow: With regulatory clarity, capital inflows into ETH trading products in the North American market have repeatedly hit new highs. Statistics show that on July 17 alone, the net inflow of U.S. spot ETH ETFs reached $779.6 million, setting a historical record. This indicates strong institutional demand for ETH allocation, with capital accelerating towards the ETH market.
Rapid advancement of Ethereum's Pectra upgrade roadmap: The Pectra upgrade (Prague + Electra hard fork), set to launch on May 7, 2025, increases the staking limit for individual validators to 2048 ETH and recalibrates fees to significantly enhance Layer-2 throughput while supporting account abstraction. Vitalik Buterin and Ethereum core developers are also actively promoting increases in Gas Limit and ZK integration, with future ETH TPS expected to break into triple digits.
Positive macroeconomic expectations: As U.S. inflation rates decline, the market predicts that the Federal Reserve may begin a rate-cutting process in 2025-2026. A decline in interest rates means that traditional risk-free yields are falling, highlighting the relative attractiveness of ETH staking yields.

5. Conclusion

Regardless, ETH's strong fundamentals provide fuel and imaginative space for SBET's market value, also determining the ceiling for SBET's valuation to some extent.

Currently, Ethereum is in a "positive flywheel" phase with multiple favorable factors overlapping. The value of ETH as a "productive asset" is being re-recognized and re-priced by the market, with its on-chain yield 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: Be aware of the slowing growth of per share ETH and the risk of ETH price correction.

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