Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at how the Bitcoin announcement by Gamestop is backfiring.
GameStop Bitcoin Announcement Backfiring
The official announcement from Gamestop that they will begin to invest in Bitcoin has not done anything to improve the image of the company. As part of GameStop’s official announcement the price of GME stock spiked following CEO Ryan Cohen posting pictures of himself being friends with Michael Saylor earlier this year. However, Wall Street has not reacted well to the latest news and stocks have fallen by 25% following the official announcement.
The sell-offs are linked with a number of factors, which includes the details of what GameStop intends to do. They revealed they are looking to raise $1.3 billion as they look to build their Bitcoin portfolio. Critics have argued that it will make sense if investors snap up this debt as they could then be able to decide to purchase this Bitcoin purely for themselves, or to gain exposure through an exchange-traded fund.
There has also been a large amount of frustration aimed at the timing of their announcement. With Bitcoin sitting below $90,000 for most of March and the likelihood of investors having a negative sentiment towards the investments increasing due to the negative movement of the market compared to if the market was showing a bullish momentum. GameStop have also disclosed they are planning on shutting down a “significant number” of their stores. This will add to the high number of closures in recent years.
At one point GameStop had 6,000 stores around the globe, but that has almost halved across the last decade. This was always likely as the online marketplace continues to grow and expand, but the rapid closure of these stores along with the quick succession of these announcements almost seems like GameStop is now intent on turning its back on its core business. The digital assets space looks like the future for GameStop.
The number of short traders has seen a significant growth as the New York Stock Exchange has had to activate temporary restrictions. This is major as back in 2021 the Reddit group WallStreetBets triggered a short squeeze and caused hedge funds to lose eye-watering amounts of money. GameStop was effectively turned into a “meme stock,” and it’s struggled to shake off this reputation since. According to TradingView data, short positions on GameStop jumped 234% on March 27, reaching 30.85 million shares.
The crypto sceptic Peter Schiff has voiced his enthusiasm as he watched GameStop’s stock, writing on X:
“Smarter investors are selling as they realize that wasting cash buying Bitcoin is not a viable long-term business model.”
He also noted that from a trader’s perspective, “gambling on companies buying Bitcoin is not a good investment strategy.” Given that companies such as Strategy and Coinbase have experienced outsized moves when the crypto market takes a downturn this is an important statement which has strong merit to its claims. While GameStop will continue to live on, the poor state of its core business has been the reverse of its finances as the company retains around $4 billion in cash piles. This was achieved by offering new stock and diluting the value of existing shares.
Have a great day.
Peace. CryptoGod-1.
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