Primitive Ventures: Why Are We Betting on SharpLink Gaming?

Authors丨Yetta & Sean, Partners at Primitive Ventures

Source | White, MarsBit

Original Title | Why Are We Investing in SBET? The Undervalued Ethereum Beta, A New Starting Point for CeDeFi Integration

This article was written in May 2025. In May, we completed our PIPE investment in SharpLink, which is a milestone achievement in our focus on the PIPE market since the beginning of the year. Primitive Ventures has been actively positioning itself since the beginning of this year, capturing the trend of CeDeFi integration with a forward-looking perspective, and has taken the lead in focusing on PIPE transactions related to digital asset treasuries (Digital Asset Treasury PIPE). Within this framework, we systematically studied all representative transaction cases, and SharpLink is undoubtedly the most critical and representative one we have participated in so far.

1. Why We Invest

ETH vs BTC: The Division of Productive Value

Compared to BTC, which lacks native yield generation capabilities, Ethereum, as an income-generating asset, inherently possesses the characteristics of producing staking rewards. Strategies based on BTC, like MicroStrategy, primarily rely on financing to purchase coins, lacking self-generated asset income and carrying higher leverage risks. In contrast, SBET has the potential to directly utilize ETH's staking rewards and the DeFi ecosystem to achieve on-chain compounding growth, creating real value for shareholders.

Currently, there are no ETH staking ETFs approved under the existing regulatory framework, making it nearly impossible for the public market to capture the economic potential of the Ethereum yield layer. We believe that SBET offers a differentiated path: with the support of Consensys, the company has the opportunity to implement protocol-native strategies, thereby achieving considerable on-chain returns, with expectations that even outperform the future performance of ETH staking ETFs.

In addition, the implied volatility of Ethereum (69) is significantly higher than that of Bitcoin (43), which introduces asymmetric upward options for equity-linked structures. This is particularly attractive for investors executing convertible bond arbitrage and structured derivative strategies—in this framework, volatility becomes a monetizable asset rather than a source of risk.

**2.**Strategic Participation of Consensys

We are very proud to partner with Consensys, which is the lead investor in this $425 million PIPE financing. As the most effective executor of Ethereum commercialization, Consensys has unique advantages in technical authority, product ecosystem depth, and operational scale, making it an ideal investor to drive SBET as a native enterprise vehicle for Ethereum.

Consensys was founded in 2014 by Ethereum co-founder Joe Lubin and has played a key role in turning Ethereum's open-source foundation into scalable real-world applications: from EVM and zkEVM (Linea) to the MetaMask wallet, which has brought tens of millions of users into Web3. Consensys has raised over $700 million from top investment firms such as ParaFi and Pantera, and has a series of successful strategic acquisition experiences, making it one of the most deeply embedded commercial operators in the Ethereum ecosystem.

Joe Lubin serving as chairman is not just a symbolic gesture. As one of the co-architects of Ethereum's core design and a leader of one of the most important infrastructure companies today, Joe has a unique and comprehensive understanding of Ethereum's product roadmap and asset structure. His early career experience on Wall Street has also equipped him with the proficiency to navigate capital markets, enabling SBET to smoothly integrate into institutional finance.

We see a unique combination of an asset and the most capable investors in SBET. This synergy forms a powerful positive flywheel, driven by the protocol's native reserve strategy and its native leaders. Under the leadership of Consensys, we believe SBET has the potential to become a flagship case, demonstrating how Ethereum's productive capital can achieve institutionalization and scale in traditional capital markets.

**3.**Market Valuation Comparison

To understand the investment opportunities of SBET, we analyzed the cryptocurrency reserve strategies of different listed companies:

MicroStrategy: A Pioneer of the Crypto Reserve Strategy

MicroStrategy has set an industry benchmark for its cryptocurrency reserve strategy. As of May 2025, it has accumulated a total of 580,250 Bitcoins, valued at approximately $63.7 billion based on the market value at that time. MSTR's strategy involves purchasing Bitcoins through issuing low-cost debt and equity financing, which has sparked a wave of corporate imitation, fully demonstrating the feasibility of cryptocurrency assets as reserve assets.

As of May 2025, MSTR holds 580,250 bitcoins (approximately $63.7 billion), its stock is trading at 1.78 times the mNAV (market cap/net asset value), highlighting the strong demand from investors for regulated, leveraged exposure to crypto assets through publicly listed stocks. This premium is the result of multiple factors working together, including the upside potential brought by leverage, eligibility for index inclusion, and the convenience of access compared to direct holding of coins.

From historical data, between August 2022 and August 2025, MSTR's mNAV fluctuates between 1x and 4.5x, reflecting the significant impact of market sentiment on valuations. When the multiple reaches 4.5x, it is usually accompanied by a Bitcoin bull market and large purchases of MSTR, indicating a high level of optimism among investors; whereas when the multiple falls back to 1x, it often occurs during market consolidation phases, revealing the cyclical fluctuations of investor confidence.

Comparison of Similar Companies

We conducted a horizontal analysis of several publicly traded companies that adopt a BTC reserve strategy:

• In terms of BTC net assets (BTC NAV), which refers to the total value of Bitcoin held by the company, MicroStrategy leads with 580,250 BTC (approximately 6.37 billion USD), followed by Metaplanet (7,800 BTC, approximately 857 million USD), SMLR (4,264 BTC, approximately 468 million USD), ALTBG (847 BTC, approximately 9.3 million USD), and SWC (59 BTC, approximately 6.4 million USD).
• In terms of the ratio of market value to BTC NAV (mNAV), SWC has the highest premium at 27.06 times, mainly due to its small BTC holding base and strong market enthusiasm. ALTBG's mNAV is 8.32 times, and Metaplanet is 5.29 times, both maintaining relatively high levels; in contrast, MSTR is at 1.78 times, and SMLR is at 1.25 times, with more moderate valuation premiums due to their larger asset sizes and existing debts.
• BTC Yield YTD %( (diluted adjusted, the percentage growth per share of BTC) shows that small-cap companies exhibit a higher per-share BTC growth rate due to continuous accumulation, with ALTBG reaching 431% and SWC at 300%. These yield data reflect their capital efficiency and compounding ability.
• Based on the current growth rate of BTC reserves )Days/Months to Cover mNAV(, ALTBG and SMLR could theoretically accumulate enough BTC within 5 months to fill their current mNAV premium, providing potential alpha space for NAV convergence trading and relative mispricing.
• In terms of risk, the debt of MSTR and SMLR accounts for 15.7% and 21.3% of their BTC NAV, respectively, thus facing higher risk when the BTC price drops; whereas ALTBG and SWC have no debt, making the risk more manageable.

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Japan Metaplanet Case: Valuation Arbitrage in Regional Markets

Valuation differences often stem from the varying scales of asset reserves and capital allocation frameworks. However, the dynamics of regional capital markets are equally crucial and are an important factor in understanding these valuation discrepancies. One highly representative example is Metaplanet, a company often referred to as "Japan's MicroStrategy."

Its valuation premium not only reflects its holdings of Bitcoin assets but also reflects the structural advantages related to the domestic market in Japan:

• Advantages of the NISA Tax System: Japanese retail investors are actively allocating Metaplanet stocks through NISA (Nippon Individual Savings Account). This mechanism allows for tax-free capital gains of up to approximately $25,000, which is significantly more attractive compared to the maximum tax rate of 55% on directly held BTC. According to data from Japan's SBI Securities, as of the week ending May 26, 2025, Metaplanet was the most purchased stock among all NISA accounts, driving its stock price up by 224% in the past month.
• Dislocation of the Japanese Bond Market: Japan's debt-to-GDP ratio has reached as high as 235%, and the yield on 30-year government bonds (JGB) has risen to 3.20%, indicating that the Japanese bond market is facing structural pressures. Against this backdrop, investors increasingly view the 7,800 bitcoins held by Metaplanet as a macro hedging tool to cope with the depreciation of the yen and domestic inflation risks.

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**IV.**SBET: Layout of Global ETH Leading Assets

When operating in the public market, regional capital flows, tax systems, investor psychology, and macroeconomic conditions are equally important as the underlying assets themselves. Understanding the differences between these jurisdictions is key to uncovering asymmetric opportunities in the combination of crypto assets and public equity.

SBET, as the first publicly listed company focused on ETH capital, also has the potential to benefit from strategic judicial arbitrage. We believe that SBET has the opportunity to further unlock regional liquidity and mitigate the risk of narrative dilution by achieving dual listing in Asian markets such as the Hong Kong Stock Exchange or Nikkei. This cross-market strategy will help SBET establish its position as the most representative Ethereum-native listed asset globally, gaining recognition and participation at the institutional level.

5. The Institutionalization Trend of Cryptocurrency Capital Structure

The integration of CeFi and DeFi marks a key turning point in the evolution of the cryptocurrency market, indicating its increasing maturity and gradual incorporation into a broader financial system. On one hand, protocols like Ethena and Bouncebit are demonstrating this trend by combining centralized components with on-chain mechanisms, thereby expanding the utility and accessibility of crypto assets.

On the other hand, the integration of crypto assets with traditional capital markets reflects a deeper macro-financial transformation: that is, crypto assets are gradually establishing themselves as a compliant asset class with institutional-level quality. This evolutionary process can be roughly divided into three key stages, each representing a leap in market maturity:

• GBTC: As one of the earliest BTC investment channels aimed at institutions, GBTC provides regulated market exposure but lacks a redemption mechanism, leading to a long-term deviation of its price from its net asset value (NAV). Although groundbreaking, it also reveals the structural limitations of traditional wrapped products.
• Spot BTC ETF: Since receiving SEC approval in January 2024, the spot ETF has introduced a daily creation/redemption mechanism, allowing prices to closely track NAV, significantly enhancing liquidity and institutional participation. However, due to its inherently passive nature, it cannot capture key aspects of the native potential of crypto assets, such as staking, yields, or actively creating value.
• Corporate Treasury Strategy: Companies like MicroStrategy, Metaplanet, and now SharpLink have further advanced the strategy by incorporating crypto assets into their financial operations. This phase goes beyond passive holding, beginning to utilize strategies such as compound returns, asset tokenization, and on-chain cash flow generation to enhance capital efficiency and drive shareholder returns.

From the rigid structure of GBTC to the breakthrough mechanism of spot ETFs, and now to the rise of reserve models oriented towards yield optimization, this evolutionary trajectory clearly demonstrates that crypto assets are gradually embedding themselves into the framework of modern capital markets, bringing stronger liquidity, higher maturity, and more opportunities for value creation.

**6.**Risk Warning

Although we are confident in SBET, we still maintain a cautious attitude and pay attention to two major potential risks:

• Premium Compression Risk: If the SBET stock price remains below its net asset value for an extended period, it may lead to subsequent equity financing dilution.
• ETF Replacement Risk: If the ETH ETF is approved and supports staking functionality, it may provide a more convenient compliant alternative, attracting some capital outflow.

However, we believe that SBET, with its native ETH yield capabilities, can still outperform ETH ETF in the long term, achieving a healthy combination of growth and returns.

In summary, our investment of $425 million in SharpLink Gaming is based on a strong belief in the strategic role of Ethereum in corporate treasury strategies. With the support of Consensys and the leadership of Joe Lubin, SBET is expected to represent a new phase of value creation in the crypto space. As the fusion of CeFi and DeFi reshapes the global market, we will continue to support SBET to achieve long-term outstanding returns, fulfilling our mission of "discovering high-potential opportunities."