GameStop's Bitcoin Bet: TradFi's New Nightmare

GameStop's Bitcoin Proposal Sparks TradFi Stir

GameStop Corp. (GME) has received a letter from Strive Asset Management, urging the gaming retailer to invest in Bitcoin. The proposal, if implemented, could significantly impact traditional finance investors, according to a crypto exchange executive.

GameStop CEO Ryan Cohen confirmed receiving a Feb. 24 letter from Strive CEO Matt Cole, advising the company to use its $4.6 billion in cash to buy Bitcoin (BTC) and fund additional purchases through market offerings. John Haar, managing director of the BTC-only exchange Swan Bitcoin, commented on the potential impact of such a move, stating that it would "bake the noodles" of many traditional finance investors and commentators who dismiss both GME and Bitcoin.

GameStop's history is intertwined with the 2020 and 2021 meme stock craze and a short squeeze strategy inspired by Reddit users, which led to substantial losses for Wall Street firms short on GME. The company's stock increased nearly 11,500% from $0.70 to $81.25 between April 2020 and January 2021.

Cole's letter follows a Feb. 13 report that GameStop was considering investing in Bitcoin and alternative asset classes. In his letter, Cole recommended the company purchase more Bitcoin by issuing new equity via at-the-market offerings and convertible debt securities. He also suggested selling or closing stores operating at a loss and expanding the company's online presence to facilitate further Bitcoin purchases.

Cole argued that a Bitcoin treasury would position GameStop "from meme stock to market leader" and serve as a "true savings asset" by protecting the company against inflationary pressures impacting fiat currencies. He advised GameStop to avoid investing in other cryptocurrencies, as a Bitcoin-only approach would reinforce the company's image as a "disciplined, forward-looking organization" and protect long-run shareholder returns.

GameStop's Cohen has recently shared a photo with Michael Saylor, the chair of the $44.2 billion Bitcoin-holding business intelligence firm Strategy, formerly MicroStrategy. Strategy's Bitcoin-buying strategy has inspired other public firms, including Metaplanet and Semler Scientific, to adopt similar strategies.