The Breakdown - The Prophecy is Fulfilled: Gamestop to Buy BTC

Episode Date: March 27, 2025

Your 2021 self just did a happy dance. Gamestop and Bitcoin have converged as the company plans to spend it's big cash pile at least in part on a BTC treasury reserve. Could anything be more perfect? Sponsored by: Crypto Tax Calculator Accurate Crypto Taxes. No Guesswork. Say goodbye to tax season headaches with Crypto Tax Calculator: Generate accurate, CPA-endorsed tax reports fully compliant with IRS rules. Seamlessly integrate with 3000+ wallets, exchanges, and on-chain platforms. Import reports directly into TurboTax or H&R Block, or securely share them with your accountant. Exclusive Offer: Use the code BW2025 to enjoy 30% off all paid plans. Don’t miss out - offer expires 15 April 2025! Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today. Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, March 26th, and today we are talking, yes, GameStop and Bitcoin all in one. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link at the show notes or go to bit.ly slash breakdown pod. Well, friends, just when you thought memestock mania was over for good, GameStop has announced a Bitcoin treasury strategy. On Tuesday in their quarterly earnings, the company announced the change to their investment policy

to allow Bitcoin to be held as a treasury asset. This move has been hinted at for a while. CNBC reported in February that GameStop was considering a crypto investment, and a few weeks ago, CEO Ryan Cohen had posted a picture of himself meeting with Michael Saylor and Mara Lago. So, does it make any sense at all for a basically defunct brick-and-mortar retailer to lean into Bitcoin? The market certainly seems to think so, with the stock up 10% in after-hours trading. Then again, a 10% move is peanuts for the highly reflexive meme stock and could simply be a

knee-jerk reaction to the company's next caper. Digging into the financials, there could be a lot to like here. The company is cash flow positive with net income of 131 million for the fourth quarter. That's more than double their returns for the same quarter of last year. Annual net income was up 1,950%, compared to a fairer. disastrous 6.7 million in 2023, with the company barely breaking even on 5 billion in revenue. This was all a huge surprise to Wall Street analysts, with earnings per share coming in about four times higher than consensus estimates. GameStop are also sitting on a gargantuan 4.75 billion

cash pile, gained from selling stop into the last GameStop pump in May of last year. Something that fundamentally changes the direction of the business always seemed like part of the plan. Way back in September 2020, before the meme stock exploded, Chui co-founder Ryan Cohen took a 10% position in the company becoming their largest shareholder. He was appointed CEO, president, and chairman in 2023. The meme stock lore was always that Cohen had big plans to transform the company, but up until now, nothing ever much came from it. GameStop launched an NFT marketplace during the height of that craze, but the platform failed to catch on. Still, the GameStop true believers thought Cohen had a master plan and excused the extreme share

dilution from last year's fundraising. Even serious investors were calling for the Bitcoin in February's Tribe Asset Management CEO Matt Cole sent a letter to Cohen asking for the cash on hand to be used to buy Bitcoin. He wrote, we believe GameStop has an incredible opportunity to transform its financial future by becoming the premier Bitcoin Treasury company in the gaming sector. Cohen publicly acknowledged the proposal tweeting, letter received. So with no better option to invest billions of dollars into growing the business, it seems like it's time for Plan B. Alongside the purchase of Bitcoin using their cash pile, the GameStop board specifically approved raising money through debt and equity to fund Bitcoin purchases.

In other words, they've been given approval to go full micro strategy. What's more, Jeff Park of Bitwise, noted that GameStop is beginning in a much better place than Micro Strategy did back in 2020. He wrote, Micro Strategy had a mere $1.3 billion market cap when it started stacking BTC. GameStop is starting 10x bigger, and I'd bet this will hit even harder than the Bitcoin's strategic reserve with real follow-through. Just wait for it.

Anyone asking, why is this special, doesn't get the fundamental power of me. Gamesop is the OG, the first retail revolt against centralization. No bond is stronger than the ethos of GME and BTC buy and for the people. Plus, Ryan Cohen knows a thing or two about financial engineering. Micro Strategy represented 28% of inflows into Bitcoin last year. 22 billion of 78 billion per JPMorgan. US Strategic Reserve announcement was 0% of inflows and maybe negative. So yeah, for the sake of the industry, I'm going to put my money on GameStop, thanks for your concern. Anonymous financial engineering expert the giver commented, Candidly, I did not see the announcement coming,

but this is an extension of our theory around how the Bitcoin's strategic reserve is not a short-term effect. Beyond quote-unquote government adoption, which we have never waited highly, we suspect that the SBR plus the case study of micro-strategy will usher in a wave of corporate treasuries, ready and willing to signal Bitcoin as an addition to the coffers. So it's not just pink-slip shell companies,

but any company that is cash-heavy and could see one to two percent allocation being pertinent as a liquid short-dated instrument. The SBR has in some ways green-lit this away from the Frankenstein-esque polarization that Microstrategy may have been viewed as. Outside of the technical financial analysts, many Bitcoiners simply like the stock. The Bitcoin therapist wrote, Remember what I said micro strategy was going to be the most hated rally of all time?

I was wrong. It's going to be GameStop. Joe Burnett, the director of market research at Unchained Capital commented, In 2021, GameStop soared for no fundamental reason. In 2025, GameStop will soar because it acquired the world's best money before everyone else. Indeed, everything was looking pretty good for the next major company to adopt Bitcoin until Jim Kramer applied his curse, tweeting, GameStop is finally doing my Bitcoin ploy. CEO Ryan Cohen responded, no, smiley laughing face. Jokes aside, this is the first time

we've seen a cash-rich, largely legacy business looking to add Bitcoin to the treasury. And Cohen isn't known for doing things by half measures, so this could snowball into a big play. Columbus Bitcoin noted, it's kind of ironic that all the D-Gen's buying GameStop for Fiat gains gave them the ability to convert that into the hardest, money on the planet. I mean, sheerly from a sense of poetics and romance, this is just the most perfect thing, right? Anyways, obviously we will keep an eye closely on this, but I am excited for one to see how this plays out. Today's episode is brought to you by Crypto Tax Calculator. If you're looking for accurate crypto taxes with no guesswork, check out Crypto Tax Calculator.

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If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show. Next up, a couple of stories that are follow-ups to the cleanup theme of 2025. First, the FDIC has fallen in line and removed reputational risk as a criteria for bank exams. We cover this topic extensively on Monday's show after the OCC took similar action. But as a brief recap, reputational risk was a component of the scoring system used by regulators to assess banks. It was extremely subjective and allowed regulators to put pressure on banks to reject customers associated with disfavored industries during each iteration of Operation chokepoint.

In a letter written to Republican lawmakers, FDIC acting chairman Travis Hill wrote, while a bank's reputation is critically important, most activities that could threaten a bank's reputation, do so through traditional risk channels, e.g. credit risk, market risk, etc., that supervisors already focus on. He said that the agency had completed their review of regulatory handbooks and other guidelines, adding, we're actively working on a rulemaking to ensure supervisors do not criticize activities or actions on the basis of reputational risk, which we expect to be able to issue in the near future. Cryptozar David Sachs wrote, big win for crypto. The FDIC is following the OCC's lead in removing reputational risk as a factor in bank supervision. Reputational risk may sound good in

theory, but it was defined as, quote, the potential that negative publicity regarding an institution's business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions. In practice, this vague and subjective criteria was used to justify the debanking of lawful crypto businesses through Operation Chokepoint 2.0. Banking criteria should be objective and quantitative, not based on the potential for untrue stories. Nick Carter tweeted, Reputational risk in bank oversight is basically gone. RIP, you will not be missed. Reputational risk was a circular mechanic that allowed bank regulators to cut off any industry they disliked. It was a catch-22. And although reputational risk is basically gone, it hasn't been completely

removed from the regulatory system. The Federal Reserve has so far remained completely silent on the issue, as the two other banking regulators have rushed to address it. Earlier in the week, Caitlin Long noted that the Fed still has multiple open investigations into crypto-friendly banks, largely on the basis of reputational risk. She argued that Democrats are still in control of the Fed, and noted the administration won't be able to appoint a new governor to shift the balance of power until the beginning of next year. On Monday, semaphore filled in some details about the growing power struggle between the Treasury and the Fed. Their sources said the Treasury wanted to merge the three major banking regulators into one agency, but knew they wouldn't be able to get such an approval

through Congress. On Federer, the Treasury is still seeking to exercise a lot more control over banking rules, including those written by the traditionally independent Federal Reserve. Karen Petrao, the co-founder of Federal Financial Analytics, commented, there are two ways to consolidate federal bank regulation. First, you can change the law. The other way is for one federal entity to assert all the power it has under the law, and maybe more simply to take de facto charge of significant Fed, OCC and FDIC supervisory and regulatory policy. Secretary Besson has now made it clear that the Trump administration will open door number two. Administration figures have expressed the desire to separate the notions of independence on monetary

policy from the Fed's regulatory functions. In a podcast appearance back in May, now Treasury Chief of Staff, Dan Katz said, I think bank regulation is an inherently fiscal function, and therefore it should be in a body that's politically accountable, and that doesn't necessarily impinge on the Fed's ability to operate independently with respect to monetary policy. Aaron Klein and Obama administration treasury official commented, does the Treasury Secretary really believe that he ought to be the arbiter of how much capital each individual bank should have in the United States? That would be a radical change from the status quo, and a politicization of bank regulation that would reverse decades of precedent. Still, while Klein is no fan of centralizing

power under the Treasury, he's also a longtime advocate of removing regulatory power from the Fed. He advocated for this reform after the 2008 financial crisis and again in 2023 following the Silicon Valley Bank collapse. Adding more commentary on Twitter, he wrote, the Fed's top priority is and always will be monetary policy. Bank regulation can't be left to an organization where it's the second, third, or fourth priority. So for those of you keep in track at home, although Operation Chokepoint 2.0 is coming to a close with major reforms at two of the three major banking regulators, the hanging chat and question mark still remains the Fed. But to the extent that there are questions, that doesn't mean that the world isn't moving

firmly ahead. Take, for example, Fidelity entering the race for a spot Salana ETF. The gigantic asset manager submitted their paperwork with the SEC on Tuesday, joining firms including Bitwise, Franklin, and Vanek. The smaller asset managers have been firing off applications on all manner of crypto tokens over the past few months. These range from fairly sure bets like Solana and XRP, all the way down to the meme coins like Dogecoin and Pengu.

So far, however, the big boys haven't joined the race. We've seen nothing new from BlackRock so far, and this is the first application from Pidelity. Still, this is not a big surprise with Nate Garassi, the president of the ETF store tweeting, big players coming in now as expected. Speaking of BlackRock, they have expanded their biddle-on-chain money market fund to include Solana. The fund is an unquestioned early success story in the early stages of Tradfai's crypto adoption.

It's the largest on-chain fund and now has 1.7 billion in assets, up 165% in the last month. A spokesperson said they're aiming to cross the $2 billion mark by next month. Speaking about the strategy of bridging money market funds, Michael Sonnonshine, the CEO of tokenization partner Securitize said, we're making them unboring. We are advancing and leapfrogging some of the quote-unquote deficiencies that money markets may have in their traditional formats. Now, I'm not sure anyone can make treasury yields unboring, but they're still an important new instrument in the crypto ecosystem. What's slightly more noteworthy is that BlackRock continues to add new protocols to their product. It would have been the easiest thing in the world to

make a token effort and employ exclusively on Ethereum-based chains, but BlackRock has added Avalanche, Aptos, and now Solana. Each of those chains has different infrastructure and programming language, and so need their own custom deployment. This is categorically different than than previous TradFi rollouts. It doesn't look like BlackRock is dabbling in crypto. It looks like they are methodically ensuring that they have a dominant position in the market across as many chains as possible. A former banker going by Professor Satoshi tweeted, If they're expanding to Salana for Biddle, that means a BlackRock Solana ETF is a when, not an if. Lastly today, a bit of a lighter story before we get out of here.

Ross Ulbricht is apparently struggling to sign up for eBay. Yesterday, the Silk Road founder tweeted, Been trying to auction some personal belongings. eBay wants to verify my ID. I provided all docs a week ago and still nothing. I've talked to several eBay reps and keep being put off. Today's the last day to start an auction before I leave town. Asking crypto-Twitter for help dealing with eBay's KYC process,

there was one unified response. We'll go with Mandrix's version of the tweet with the original Bitcoin Baklava seller tweeting, Bro needs to make his own website where people can buy and sell things, just saying. A few hours later, Ross reported back, I was just told that eBay is aware of this, but is choosing to not do anything about it. First time I felt discriminated against since going free. Gee, maybe I should start my own e-commerce website. What'll I call it? And indeed, while he's playing it off for laughs, this really highlights some of the issues with the permission financial system. Ross received a full pardon, which in the eyes of the law makes it as though he was never convicted of a crime. But in the eyes of the eBay compliance department, it's still

too risky to let Ross auction off some personal belongings on their e-commerce platform. And this, folks, is why we Bitcoin. With that, however, we are going to wrap today's breakdown. Appreciate you listening as always. And until next time, be safe and take care of each other. Peace.