By: Yetta (@yettasing), Venture Partner at Primitive Ventures; Sean, Liquidity Partner at Primitive Ventures

Preface:

This article was written in May 2025. In May, we completed the PIPE investment in SharpLink, which is the interim result of our focus on the PIPE market since the beginning of the year. Primitive Ventures has been actively deploying since the beginning of this year, capturing the CeDeFi integration trend from a forward-looking perspective, and taking the lead in focusing on PIPE transactions related to digital asset reserves (Digital Asset Treasury PIPE). Under 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.

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We are pleased to announce that Primitive Ventures has participated in SharpLink Gaming, Inc. (NASDAQ: SBET)’s $425 million PIPE (Private Private Equity) transaction. This investment provides us with unique investment exposure - investing in native companies with a strategy of reserving Ethereum. This investment structure combines option attributes with long-term capital appreciation potential, reflects our strong belief in Ethereum’s strategic position in the U.S. capital market, and is consistent with our overall judgment on the institutionalization trend of crypto assets.

Why we invest

ETH vs BTC: The difference in productive value

Compared with BTC, which lacks native income-generating ability, Ethereum, as an interest-bearing asset, naturally has the characteristics of producing staking income. Strategies based on BTC, such as MicroStrategy, mainly rely on financing to purchase coins, do not have asset self-generated income, and have higher leverage risks. SBET has the potential to directly utilize ETH's staking income and DeFi ecology to achieve compound growth on the chain and create real value for shareholders.

Currently, no ETH staking ETF has been approved under the existing regulatory framework, and the public market is basically unable to capture the economic potential of Ethereum's yield layer. We believe that SBET provides a differentiated path: with the support of Consensys, the company has the opportunity to implement protocol native strategies and obtain considerable returns on the chain, and its model is expected to even outperform the performance of future ETH staking ETFs.

In addition, Ethereum’s implied volatility (69) is much higher than Bitcoin’s (43), introducing an asymmetric upside option to the equity-linked structure. This is particularly attractive for investors executing convertible bond arbitrage and structured derivatives strategies - in this framework, volatility becomes an asset to be monetized rather than a source of risk.

Consensys’ strategic involvement

We are very proud to work with Consensys, 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 promote SBET to become an Ethereum native enterprise carrier.

Founded in 2014 by Ethereum co-founder Joe Lubin, Consensys has played a key role in transforming Ethereum's open source foundation into scalable real-world applications: from EVM and zkEVM (Linea) to the MetaMask wallet, which has introduced tens of millions of users to Web3. Consensys has raised more than $700 million from top investment institutions such as ParaFi and Pantera, and has a series of successful strategic acquisitions. It is the most deeply embedded commercial operator in the Ethereum ecosystem.

Joe Lubin's appointment as chairman is more than just symbolic. As one of the co-architects of Ethereum's core design and one of the most important leaders of infrastructure companies, Joe has a unique and comprehensive understanding of Ethereum's product roadmap and asset structure. His early experience in Wall Street also gave him the proficiency to navigate the capital market, enough to guide SBET to smoothly integrate into the institutional financial system.

In SBET, we see a combination of a unique asset and the most capable investors. This synergy forms a powerful positive flywheel: driven by a protocol-native reserve strategy and a protocol-native leader. Under the leadership of Consensys, we believe SBET has the potential to become a flagship case showing how Ethereum productive capital can be institutionalized and scaled in traditional capital markets.

Market Valuation Comparison

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

MicroStrategy: Pioneer in Crypto Reserve Strategies

MicroStrategy has set an industry benchmark for crypto reserve strategies, holding 580,250 bitcoins as of May 2025, worth approximately $63.7 billion at the time. MSTR's strategy is to purchase bitcoins by issuing low-cost debt and equity financing, a model that has inspired a wave of companies to follow suit, fully demonstrating the feasibility of crypto assets as reserve assets.

As of May 2025, MSTR holds 580,250 Bitcoins (approximately $63.7 billion), and its shares trade at 1.78 times mNAV (market value/net asset value), highlighting the strong demand for regulated, leveraged exposure to crypto assets through listed stocks. This premium is the result of a combination of factors, including the upside potential from leverage, index eligibility, and ease of acquisition compared to direct holdings.

From historical data, MSTR's mNAV fluctuated between 1x and 4.5x between August 2022 and August 2025, reflecting the significant impact of market sentiment on valuation. When the multiple reaches 4.5x, it is usually accompanied by a Bitcoin bull market and MSTR's large-scale purchases, showing investors' high optimism; when the multiple falls back to 1x, it often occurs in the market consolidation phase, revealing the cyclical fluctuations of investor confidence.

Why do we invest in SBET? Undervalued Ethereum Beta, a new starting point for CeDeFi integration

Comparison with similar companies

We conducted a horizontal analysis of several listed companies that adopted BTC reserve strategies:

In terms of BTC net assets (BTC NAV) , that is, the total value of Bitcoin held by a company, MicroStrategy ranks first with 580,250 BTC (about US$63.7 billion), followed by Metaplanet (7,800 BTC, about US$857 million), SMLR (4,264 BTC, about US$468 million), ALTBG (847 BTC, about US$93 million) and SWC (59 BTC, about US$6.4 million).
In terms of market capitalization to BTC NAV ratio (mNAV) , SWC has the highest premium, reaching 27.06 times, mainly due to its small BTC holding base and enthusiastic market pursuit. ALTBG's mNAV is 8.32 times, and Metaplanet's is 5.29 times, which are also maintained at a high level; in contrast, MSTR is 1.78 times, and SMLR is 1.25 times. Due to their large asset size and debt, the valuation premium is relatively moderate.
In terms of BTC Yield YTD % (adjusted for dilution, the growth percentage of BTC per share), small-cap companies have shown higher growth rates of BTC per share due to continued increases in holdings, with ALTBG reaching 431% and SWC 300%. These earnings data reflect their capital efficiency and compounding ability.
Based on the current BTC reserve growth rate (Days/Months to Cover mNAV) , ALTBG and SMLR can theoretically accumulate enough BTC within 5 months to fill their current mNAV premium, which provides potential alpha space for NAV convergence trading and relative mispricing.
In terms of risk , MSTR and SMLR's debt accounts for 15.7% and 21.3% of their BTC NAV respectively, so they face higher risks when BTC prices fall; while ALTBG and SWC have no debt and their risks are more controllable.

Why do we invest in SBET? Undervalued Ethereum Beta, a new starting point for CeDeFi integration

Metaplanet Japan Case Study: Valuation Arbitrage in Regional Markets

Valuation differences often stem from differences in asset reserve size and capital allocation framework. However, the dynamics of regional capital markets are equally critical and an important factor in understanding these valuation differences. One of the most representative examples is Metaplanet, a company often referred to as the "MicroStrategy of Japan."

Its valuation premium reflects not only its Bitcoin holdings, but also structural advantages related to the Japanese domestic market:

NISA tax system advantages : Japanese retail investors are actively allocating Metaplanet shares through NISA (Japanese individual savings account). This mechanism allows capital gains of up to approximately $25,000 to be tax-free, which is significantly more attractive than the 55% tax rate for directly holding BTC. According to data from Japan's SBI Securities, as of the week of May 26, 2025, Metaplanet was the most purchased stock among all NISA accounts, driving its share price up 224% in the past month.
Japanese bond market dislocation : Japan's debt-to-GDP ratio is 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 pressure. In this context, investors increasingly view Metaplanet's 7,800 bitcoins as a macro hedge against the depreciation of the yen and domestic inflation risks.

Why do we invest in SBET? Undervalued Ethereum Beta, a new starting point for CeDeFi integration

SBET: Layout of the world's leading ETH assets

When operating in public markets, regional capital flows, tax regimes, investor psychology, and macroeconomic conditions are just as important as the underlying assets themselves. Understanding the differences between these jurisdictions is key to unlocking asymmetric opportunities in the intersection of crypto assets and public equities.

As the first listed company with ETH capital at its core, SBET also has the potential to benefit from strategic judicial arbitrage. We believe that SBET has the opportunity to further unlock regional liquidity and protect against the risk of narrative dilution by achieving dual listings 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 in the world and gain institutional recognition and participation.

The institutionalization trend of crypto capital structure

The convergence of CeFi and DeFi marks a critical turning point in the evolution of the crypto market, which means that it is maturing and gradually integrating into the broader financial system. On the one hand, protocols like Ethena and Bouncebit are embodying this trend by combining centralized components with on-chain mechanisms to expand 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 change: crypto assets are gradually being established as a compliant and institutional-quality asset class. This evolution can be roughly divided into three key stages, each of which represents a leap in market maturity:

GBTC : As one of the earliest BTC investment channels for institutions, GBTC provides regulated market exposure, but lacks a redemption mechanism, resulting in long-term price deviation from net asset value (NAV). Although groundbreaking, it also reveals the structural limitations of traditional packaged products.
Spot BTC ETF : Since its approval by the SEC in January 2024, spot ETFs have introduced a daily creation/redemption mechanism, allowing prices to closely track NAV, significantly improving liquidity and institutional participation. However, due to its passive nature, it cannot capture key parts of the native potential of crypto assets, such as staking, yield, or active value creation.
Corporate Treasury Strategy : Companies such as MicroStrategy, Metaplanet, and now SharpLink have further evolved their strategies by incorporating crypto assets into their financial operations. This phase goes beyond passive holdings and begins to use strategies such as compounding, asset tokenization, and on-chain cash flow generation to improve capital efficiency and drive shareholder returns.

From the rigid structure of GBTC, to the mechanism breakthrough of spot ETF, and then to the rise of the reserve model oriented towards yield optimization today, this evolutionary trajectory clearly shows that crypto assets are gradually being embedded in the architecture of the modern capital market, bringing greater liquidity, higher maturity, and more value creation opportunities.

Risk Warning

Although we are confident in SBET, we remain cautious and pay attention to two potential risks:

Premium compression risk: If SBET's share price remains below its NAV for a long period of time, it may lead to dilution in subsequent equity financing.
ETF substitution risk: If the ETH ETF is approved and supports staking functions, it may provide a simpler compliance alternative and attract some capital outflows.

However, we believe that SBET can still outperform ETH ETF in the long run due to its native earnings capability of ETH, thus achieving a virtuous combination of growth and earnings.

In summary, our investment in SharpLink Gaming's $425 million PIPE is based on our firm belief in the strategic role of Ethereum in corporate reserve strategies. With the support of Consensys and the leadership of Joe Lubin, SBET is expected to become the representative of a new stage of crypto value creation. As the integration of CeFi and DeFi reshapes the global market, we will continue to support SBET to achieve long-term superior returns and fulfill our mission of "discovering high-potential opportunities."

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