GameStop’s Crypto Play: Cashing In on the Bitcoin Boom

GameStop, made famous by social media influencer and YouTuber “Roaring Kitty,” is best known for taking on Wall Street investment firms and winning. This resulted in a major blow for Melvin Capital, who tried to short GameStop based on a conventional understanding of the market but failed to anticipate the power of peer-to-peer support. Many followers of “Roaring Kitty” proverbially took up the sword and HODLed for the long term, forcing Melvin Capital’s shorting strategy to flop. Ultimately, it left them with “egg on their face,” needing to cover their position to the tune of an estimated $5.5 billion. It demonstrates that power only wins if it understands all facets of the market—otherwise, an unlikely “Roaring Kitty” can knock over finance giants with peer-to-peer support and buy-in. So, what might be influencing GameStop’s decision to venture into the crypto market?

Treasury Diversification

It’s not unusual for companies to hold appreciating assets as part of their long-term strategic planning to deliver for shareholders. For example, Alphabet (Google’s parent company) has invested in SpaceX and Uber, making major bets on the future of transportation—and winning. Another case is where foodstuffs giant meets beauty: Nestlé has long held a significant minority stake in L’Oréal, showing that companies will generate returns for shareholders regardless of the medium. Although stocks and shares are still very much conventional investments, the principle remains the same: treasury diversification. Treasury diversification is designed to lower the risk of capital held by a company and/or put it to work for greater returns. It’s a balanced, risk-based exercise that keeps the money working for shareholders. One standout example of this is Tesla’s innovative approach to holding Bitcoin.

Tesla, the king of the electric automotive industry, has one of the most remarkable success stories of a company diversifying their assets through Bitcoin. In February 2021, the company famously purchased 42,000 BTC at a value of $1.5 billion. Below, we’ve mapped the return on this diversification to their treasury:

This represents a return of 47.2% over a four-year period, or $708 million in fiat terms, proving that for companies with the cash to invest, Bitcoin can be a lucrative short-term investment. Tesla still holds $1 billion worth of BTC but has sold around $1.2 billion over a two-year period, recouping 80.53% of their initial investment while still holding 66.67% of the initial investment’s value.

The GameStop Position

So, it’s perhaps not too surprising that GameStop “Power to the Players,” is hoping to jump on the Bitcoin wealth train. With Bitcoin being the best-performing asset for the past 10–12 years, it’s indeed a high-value appreciating asset despite the dips. As one of the few surviving in-store video game businesses, with stores dropping 50% from 5,800 in 2019 to 2,900 in 2023, diversification makes infinite sense for GameStop; bricks-and-mortar stores are declining fast, with digital sales up from 53% in 2020 to 62% in 2022 and sales down 31% in Q2 2024, leveraging their $4.6 billion cash into crypto. Could their $4.6 billion spark a “Memelord” crypto haul? Regardless of their reasons, the crypto market remains buoyant. With a $4.6 billion cash reserve, GameStop has the liquidity to invest in not-insubstantial numbers and could follow in Tesla’s footsteps, making big returns and retaining BTC for the future.

Will Others Follow?

So, will we see other companies diversify their treasury into crypto? GameStop’s move hints that brick-and-mortar businesses with dying trade—down 85% in physical game sales since 2008—might bet big on crypto to flip their fortunes. It’s a wake-up call for firms to use treasury crypto bets to fuel growth