GameStop Stock Decline Suggests Bitcoin Purchases are no Silver Bullet for Financial Troubles

Key Takeaways

• GameStop announced that it had purchased 4,710 bitcoins on Wednesday.
• The move reflects growing momentum behind bitcoin as a treasury reserve asset.
• However, GME stock declined 10.9% throughout the day.

With bitcoin increasingly adopted as a strategic treasury asset by major corporations, GameStop became the latest firm to take the plunge on Wednesday, May 28.

However, the news that GameStop had purchased 4,710 BTC failed to prevent GME from crashing by more than ten percent throughout the day.

Bitcoin as a Treasury Asset

GameStop’s announcement on Wednesday reflects the growing momentum behind bitcoin as a treasury reserve asset.

In the last seven days alone, The Blockchain Group completed a $72 bond issuance to fund BTC purchases, Norwegian crypto brokerage K33 raised and $6.2 million to launch a bitcoin treasury strategy and Trump Media announced plans to establish a $2.5 billion bitcoin treasury.

Meanwhile, the OG bitcoin treasury company, Strategy, continues to accumulate BTC with increasingly frequent purchases.

For GameStop, the company’s board unanimously voted to add bitcoin as a treasury reserve asset in March. Days later, the company concluded a convertible note offering that raised $1.3 billion to fund BTC purchases, among other things.

GME Crashes 10.9%

Many have celebrated GameStop’s embrace of bitcoin as a savvy strategy that could help the company hedge against inflation and grow its treasury assets as the company overhauls its business model.

However, as the price of BTC declined on Wednesday, traders ultimately punished GME, which closed the day down 10.9%.

For a $14 billion company to spend more than $500 million on anything was always going to prompt a strong market reaction. But considering bitcoin is known for significant intra-day price swings, its collision with GameStop’s already unstable share price is a recipe for volatility.

GameStop’s Financial Woes

The stock market rollercoaster that is GameStop’s share price obscures deeper problems that bitcoin can’t fix: the company’s continued revenue decline and lack of profitability.

GameStop’s net sales for the 2024 fiscal year fell to $3.823 billion, representing a 27% decline from the previous year. Meanwhile, operating losses ballooned from $26.2 billion to $34.5 billion.

Even with a sizeable bitcoin reserve, GameStop faces the same fundamental problem. In a digital-first gaming industry where streaming, downloadable content and online marketplaces dominate, the legacy retailer must evolve or die.

Without a solid strategy to reverse falling revenues and cut operating losses, BTC exposure may provide momentary relief, but not long-term solvency.