Sharplink’s Ethereum Treasury Plans
Last week, Sharplink, a company managing a substantial Ethereum treasury valued at $3.6 billion, disclosed to Decrypt its plans to stake part of its Ethereum holdings on the upcoming Linea mainnet. This announcement, however, has not excited the investor community as anticipated. Currently, Sharplink’s shares, traded on Nasdaq under the ticker SBET, have decreased by 11% over the past week, now priced at $15.73.
Investor Skepticism
Recent trends on Myriad, a prediction market owned by DASTAN—Decrypt’s parent company—indicate growing skepticism among users regarding Sharplink’s ability to accumulate 1 million ETH before the September 16 deadline. As it stands, the company holds 837,230 ETH, roughly valued at $3.62 billion, leading 70% of users at the start of the month to doubt the company’s ETH target. This doubt has intensified, with current figures showing that 82.5% of users are not optimistic about Sharplink’s ability to reach that milestone soon.
Expert Insights
Industry expert Samantha Bohbot, serving as the chief growth officer at RockawayX, suggested that the decline in share price and rising investor skepticism may stem from Sharplink’s recent decisions to issue new shares. Such actions dilute the value for current shareholders as funds are raised for purchasing additional ETH.
“It’s a strategy that may be appreciated in time as the market begins to differentiate between successful DATs that yield returns on crypto holdings and those that do not,”
Bohbot noted.
She elaborated that Sharplink’s strategy entails equity financing, inherently leading to the issuance of more SBET shares, which in turn diminishes the share value for existing stakeholders. Consequently, the prospect of further share dilution could be deterring potential investors. Bohbot pointed out that current digital asset treasury (DAT) investors seem less positioned as long-term supporters and more as technical traders, focused on fluctuations in share prices rather than the long-term viability of generating yield.
Current Staking and Future Prospects
Although she expressed that the staking initiative on Linea is a long-term approach, it does not currently appeal to investors. As of now, Sharplink has already been staking some of its ETH on the Ethereum mainnet since June, earning approximately $10 million in rewards reflected in an additional 2,318 ETH. Transitioning ETH to Consensys’s Linea layer-2 network may potentially benefit Linea stakeholders more than impacting SBET investors directly.
Concerns About Linea
Tesseract’s CEO James Harris raised additional concerns about the reliability of Linea, given its status as a newer, untested platform. Unlike established custodial staking providers, investors might be wary of the risks associated with smart contracts and operational challenges, although he suggested Consensys’s involvement could alleviate some fears.
Consensys has played an essential role in Sharplink’s ETH treasury since its inception, highlighted by a substantial $425 million private investment in public equity (PIPE) round earlier this May. As part of this deal, Joseph Lubin, CEO of Consensys and Ethereum co-founder, joined SBET’s board as the chairman while Sharplink became part of the Linea Consortium.
Conclusion
Despite an expectation from Ethereum investors for Sharplink to stake on Linea, uncertainties surrounding yield terms and liquidity mechanics remain, complicating risk-reward evaluations for institutional investors, as pointed out by Harris.
