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

@SharpLinkGaming, a Nasdaq small-cap stock originally with a market capitalization of only about $10 million, has seen its stock price skyrocket by over 200% in the past month! The key driver behind this price surge is a "flywheel effect" strategy centered around ETH.

So, what is SBET's "ETH Flywheel" model? Can this ETH rally fuel a new bull market? This tweet thread will provide you with answers:

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

The surge of SBET (SharpLink Gaming) is rooted in its multiple purchases of ETH, making it a new whale behind ETH. Simply put, the company has established a self-reinforcing capital flywheel using ETH: by financing stock purchases to buy ETH - leveraging ETH's price and narrative to boost the stock price - then using a higher valuation to finance the purchase of more ETH, cycling repeatedly to continuously grow its asset base.

A breakdown of this flywheel reveals three steps:

(1) Low-cost funding for coin purchases: In May of this year, Ethereum co-founder Joe Lubin's ConsenSys and other crypto venture capitalists participated in a PIPE private placement in SBET, injecting $4.25 billion at a price of $6.15 per share, allowing SBET to acquire approximately 163,000 ETH.

(2) Market enthusiasm driving up stock prices: Fueled by the "Ethereum Treasury" narrative, investors flocked in, rapidly driving up SBET's stock price. This psychological premium caused the company's market value to swell rapidly.

(3) Refinancing at a higher valuation to expand the balance sheet: The surge in the stock price provided an opportunity for secondary offerings. SBET could then sell new shares at a high price to raise funds, buy more ETH, and repeat this process, creating a snowball effect.

As of today, SBET has acquired a total of 32,892 ETH (approximately $115 million). Currently, SBET holds about 326,074 ETH, with a total value of around $1.14 billion. This holding size has propelled SBET beyond the Ethereum Foundation, establishing it as a new whale in the ETH ecosystem with a sudden increase in market influence.

2. Retrospective: From Gambling Marketing to Ethereum Reserves, a "Last Stand"

The strategic transformation of SBET was not accidental. According to its 2024 financial report, SharpLink Gaming's full-year revenue declined by 26.1% year-on-year, with sluggish growth in traditional gambling marketing business and pressure from losses prompting the company to seek new capital injection and diversify its asset allocation.

Against this backdrop, SBET turned its attention to blockchain and in February of this year announced the acquisition of a 10% stake in the UK blockchain online gambling company CryptoCasino and later collaborated with ConsenSys, attempting to disrupt its business through an "Ethereum Reserve Strategy."

So, why is the market bullish on SBET's ETH reserve?

Firstly, ETH's "productive asset" attribute: Unlike Bitcoin's value storage attribute as "digital gold," Ethereum has staking and natural earning capabilities in the DeFi ecosystem, holding it is not just waiting for its price to rise. Bitcoin lacks such a native earning mechanism and relies more on price fluctuations.

Secondly, filling the traditional market ETH yield exposure gap: As of now, US regulatory agencies have not approved any ETH staking ETF, meaning traditional market investors find it difficult to directly access ETH's staking yield layer. However, SBET is expected to fill this gap by operating protocol-based strategies in cooperation with ConsenSys, bringing substantial on-chain returns and possibly surpassing the future yield of ETH staking ETFs.

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

III. How Long Can SBET's "Infinite Bullets" Last?

With the soaring stock price, SBET's valuation is now significantly higher than the net value of its held crypto assets, showing a premium of up to several times the "mNAV" (Market Value to Net Asset Value). Currently estimated, SBET's market value is about 3.92 times the ETH market value in its treasury, indicating that investors have given a significant narrative premium support.

Referring to the Bitcoin treasury stock MicroStrategy, which 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 approach upwards in an optimistic scenario. (Note that this comparative method may be subject to reflexivity effects and is for reference only. @Joylou1209)

Introducing a new computational approach related to this, [https://x.com/Joylou1209/status/1946070821883257040](https://x.com/Joylou1209/status/1946070821883257040).

The computational process shown below is based on the currently held ETH, not on future expectations of SBET. When considering the addition of 5 billion ATM, an estimate of SBET's future mNAV can be referenced at [https://x.com/0x_RayBTC/status/1946103032267301322](https://x.com/0x_RayBTC/status/1946103032267301322).

At the same time, one cannot help but wonder: how long can this flywheel mode continue?

On the one hand, as discussed earlier, the core logic behind the current rise of SBET is its "flywheel effect" built around ETH. The key is the growth of the core variable "ETH per share = Total ETH of the company / Total shares."

So, theoretically, if the SBET stock price increase> ETH price increase, this is the most favorable scenario: the stock price increases rapidly, the company can finance more cash with fewer shares; ETH price increases slowly, making it relatively cheaper to buy. The result is that new funding buys more ETH, ETH per share increases, and the flywheel accelerates.

On the other hand, this model is not indefinitely sustainable. The potential risks of adjustment mainly include:

Slowdown in ETH per share growth: As the total shares continue to expand, even with continuous ETH purchases, it is difficult to maintain a high growth rate of ETH concentration. Once the growth rate of ETH per share declines, market expectations of its future growth will weaken, and the valuation premium may subsequently fall.

ETH price correction risk: SBET's asset value is highly dependent on ETH. Once ETH price corrects, as market risk appetite declines, the valuation system will face recalibration, triggering simultaneous stock price adjustments. Especially in a bear market, if SBET's decline> ETH's decline, the risk is greatest.

IV. Ethereum Outlook: Flywheel Acceleration, Is the Bull Market Far From Over?

The sharp rise of SBET is fundamentally an early pricing of Ethereum's future value, and Ethereum's future performance will directly determine whether SBET's "flywheel" can continue to spin. Here are some recent bullish news about ETH for your reference:

1. Largest Regulatory Bullishness and Policy Announcement in History: Last night, the U.S. House of Representatives overwhelmingly passed three legislative proposals related to cryptocurrency regulation, including stablecoins. Among them, the "GENIUS Act" provides a clear framework for stablecoin issuance, consolidating ETH's position as the base infrastructure for stablecoins. Additionally, a recent U.S. court ruling clearly stated that ETH is a commodity, not a security. This is crucial—it means that the legal barriers for institutional investment in ETH are decreasing.

2. Institutional Fund Inflow: With increased regulatory clarity, the influx of institutional funds into the North American ETH market has repeatedly hit new highs. According to statistics, on just July 17th, the net inflow of the U.S. spot ETH ETF reached as high as $7.796 billion, setting a new historical record. This also demonstrates the institutional demand for ETH allocation, as funds are rapidly flowing into the ETH market.

3. Ethereum Pectra Upgrade Rapid Roadmap Progress: The Pectra upgrade, launched on May 7, 2025 (a hard fork combining Prague and Electra), has increased the individual validator staking limit to 2048 ETH. It has also recalibrated fees to significantly enhance Layer-2 throughput, while supporting account abstraction. Vitalik Buterin and the Ethereum core developers are actively pushing for Gas Limit increases and ZK integration, with the future expectation of ETH's TPS breaking into three digits.

4. Anticipated Macro Environment Optimism: As the U.S. inflation rate recedes, the market predicts that the Federal Reserve is likely to begin a rate-cutting process in 2025-2026. A decline in interest rates signifies a decrease in traditional risk-free yields, highlighting the relatively attractive nature of ETH staking rewards.

5. Summary

Regardless, the robust fundamentals of ETH have provided fuel and room for imagination for SBET's market value, to some extent determining the upper limit of SBET valuation.

Currently, Ethereum is in a "positive flywheel" with multiple bullish factors stacking up. ETH's value as a "productive asset" is being reevaluated and 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's rise can support the start of a new bull market? Feel free to leave comments for discussion!

Risk Warning: Be mindful of risks such as the slowdown in ETH growth per unit and ETH price pullback.

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