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

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

So, what exactly is the "ETH Flywheel" model of SBET? Can this ETH rally bring about a new bull market? This thread will provide you with answers:

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

The surge of SBET (SharpLink Gaming) originated from its multiple purchases of ETH, becoming a new whale behind ETH. Simply put, the company has established a self-reinforcing capital flywheel around ETH: by using stock financing to buy ETH - leveraging the ETH price and narrative to boost the stock price - then using a higher valuation to finance the purchase of more ETH, repeating this cycle to continuously grow its asset base.

A breakdown of this flywheel reveals three steps:

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

(2) Market enthusiasm drives up stock price: With the backing of the "Ethereum Treasury" narrative, investors rushed in, causing SBET's stock price to soar rapidly, with this psychological premium rapidly inflating the company's market value.

(3) Refinancing at a high valuation to expand the balance sheet: The sharp rise in stock price provided an opportunity for additional issuance. 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 purchased a total of 32,892 ETH (about $115 million). Currently, SBET holds approximately 326,074 ETH, with a total value of around $1.14 billion. This position size has propelled SBET beyond the Ethereum Foundation, making it a new ETH whale, significantly increasing its influence on the market.

2. Replay: From Gambling Marketing to Ethereum Treasury, a "Do-or-Die Battle"

SBET's strategic transformation was not accidental. According to its 2024 financial report, SharpLink Gaming's full-year revenue decreased by 26.1% year-on-year, traditional gambling marketing business growth was weak, and loss pressure prompted the company to seek new capital injection and diversify its asset allocation.

Against this backdrop, SBET turned its attention to blockchain and announced in February of this year the acquisition of a 10% stake in the UK blockchain online gambling company CryptoCasino, later partnering with ConsenSys in an attempt 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 as "digital gold" for store of value, Ethereum has staking and natural yield-generating capabilities in the DeFi ecosystem, holding it is not just waiting for its price to rise. Bitcoin lacks such a native yield mechanism and relies more on price fluctuation.

Secondly, filling the traditional market ETH yield exposure gap: As of now, U.S. regulatory agencies have not approved any ETH staking ETF, meaning traditional market investors find it difficult to directly access ETH staking yield. However, SBET is expected to fill this gap with substantial on-chain returns through collaborations with ConsenSys and others, potentially surpassing the future yield of ETH staking ETFs.

Lastly, the higher implied volatility of ETH brings option value: Primitive Ventures believes ETH's implied volatility (69) is much higher than BTC's (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?

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

Referring to the Bitcoin treasury stock MicroStrategy, which reached about 4.5 times Market Value to Net Asset Value at the market peak. This also means that SBET's valuation model may still approach upward in an optimistic scenario. (Note that this comparative method may be subject to reflexivity and is for reference only. @Joylou1209)

Proposing a new computational approach here, (https://x.com/Joylou1209/status/1946070821883257040)

The calculation process in the graph below is based on the currently held ETH, not on future expectations of SBET. If we consider adding 5 billion more ATM, the estimated future mNAV of SBET can be referenced at: (https://x.com/0x_RayBTC/status/1946103032267301322)

At the same time, we also have to consider how long this flywheel mode can last?

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 "Per Share ETH Content = Total ETH of the Company / Total Share Capital."

Therefore, theoretically, if the SBET stock price increase> ETH price increase, this is the most favorable situation: the stock price rises rapidly, the company can finance more cash with fewer shares; ETH price rises slowly, making it relatively cheaper to buy. The result is that new financing buys more ETH, the Per Share ETH Content increases, and the flywheel accelerates.

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

Slowing Per Share ETH Growth: As the total share capital continues to expand, even with continuous ETH purchases, it is difficult to maintain a high growth rate of ETH concentration. Once the Per Share ETH growth rate declines, market expectations for its future growth will weaken, and the valuation premium may subsequently fall.

ETH Price Correction Risk: SBET's asset value highly depends on ETH. Once the ETH price corrects, the market's risk appetite decreases, and the valuation system will face recalibration, triggering a simultaneous stock price adjustment. Especially in a bear market, if SBET's decline> ETH's decline, the risk is greatest.

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

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

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

2. Institutional Funds Flowing In: With regulatory clarity, the influx of funds into ETH trading products in the North American market has repeatedly hit new highs. According to statistics, on just one day, July 17, the net inflow into the US spot ETH ETF reached a record high of $7.796 billion, indicating institutional demand for ETH exposure and accelerated funding flowing into the ETH market.

3. Ethereum Pectra Upgrade Fast-track Roadmap: The Pectra upgrade (Prague + Electra hard fork) launched on May 7, 2025, has increased the individual validator staking limit to 2048 ETH. It has recalibrated fees to significantly increase Layer-2 throughput while supporting account abstraction. Vitalik Buterin and Ethereum core developers are actively promoting Gas Limit increases and ZK integration, with ETH's TPS expected to exceed three digits in the future.

4. Expected Macroeconomic Environment Tailwinds: As the US inflation rate recedes, the market predicts that the Federal Reserve is likely to start a rate-cutting process in 2025-2026. A downward interest rate trajectory means traditional risk-free returns are diminishing, highlighting the relatively attractive nature of ETH staking rewards.

5. Conclusion

Regardless, ETH's strong fundamentals provide fuel and room for imagination for SBET's market value and to some extent determine the ceiling of SBET valuation.

Currently, Ethereum is in a "positive flywheel" of multiple favorable factors. The value of ETH as a "productive asset" is being reevaluated and priced by the market. Its on-chain reward mechanism, scarcity, and future institutionalization processes all provide strong upward momentum.

Do you think this ETH rally can support the start of a new bullish cycle? Feel free to comment and discuss!

Risk Warning: Pay attention to the slowing growth of ETH per unit and the risk of ETH price correction.

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