GameStop stock price falls over 25%: The carnival and disillusionment under the Bitcoin craze

Bitcoin may be the gold mine of the future, but not every company can dig up gold.

Written by: Luke, Mars Finance

On March 27, 2025, GameStop’s (ticker: $GME) share price played out a jaw-dropping drama: it skyrocketed 14% on the announcement of a debt-financed purchase of Bitcoin, then plunged more than 25% in a single day, erasing all of the previous two days’ gains.

This game retailer, which once gained fame through “meme stocks,” has once again ignited investors’ adrenaline with a rollercoaster market. However, why is the plot so tumultuous this time? Is it the bursting of the retail investors’ frenzied bubble, or is the market’s calm judgment of the new strategy? Let’s peel back this “Bitcoin candy-coated bomb” and find out.

Act One: The Temptation of Bitcoin, the Frenzy of Retail Investors

On March 25, GameStop’s board of directors dropped a bombshell: the company will put some of its cash and future debt and equity financing into Bitcoin. The news was like a flare that instantly ignited the enthusiasm of retail investors. In the after-hours trading of the day, $GME shares rose more than 6%, and the next day (March 26) pre-market soared by 14%, and still rose 11.65% to $28.36 at the close. On social media, WallStreetBets’ “Ape Legion” rallied again, with a post that read: “GME is going to be the king of Bitcoin!” “The next MicroStrategy is coming!”

This frenzy is not unfounded. Bitcoin, as “digital gold”, has been regarded as the ultimate weapon against inflation in recent years, and MicroStrategy (now known as Strategy) has become a myth in the eyes of retail investors and institutions by hoarding 500,000 bitcoins (worth more than $40 billion), and the stock price has skyrocketed dozens of times from the trough in 2020. GameStop’s move is clearly a parody of this playbook. What’s more, the company has just announced that its net income for the fourth quarter of fiscal 2024 has doubled to $131.3 million, with $4 billion in cash reserves, which undoubtedly adds some confidence to the “Bitcoin Dream”.

For retail investors, this is not only a financial adventure, but also an emotional carnival. GameStop is no longer just a game retailer, but a symbol of Wall Street in 2021. Now, it seems that it is going to take advantage of the east wind of Bitcoin to stage the drama of “Dick Silk Counterattack” again. Investors are fantasizing: if bitcoin returns to $100,000, will $GME skyrocket? This speculative psychology pushes up the stock price and allows the market to ignore the potential risks for the time being.

Act II: The Truth of 1.3 Billion Debt, Cold Water After the Carnival

However, the good show has just begun, and the plot takes a sharp turn. On March 27, the U.S. Securities and Exchange Commission (SEC) disclosed the financing details of GameStop: the company plans to issue $1.3 billion in zero-coupon convertible senior notes, maturing in 2030, to purchase Bitcoin. This news was like a bucket of cold water poured on the enthusiastic retail investors, causing the stock price to plummet rapidly from its high, with a decline of over 25% on that day, evaporating tens of billions in market value.

Why is the market reacting so violently? This $1.3 billion bond is like a candy hiding a time bomb, sweet on the outside but concealing a crisis within. First, these bonds are “convertible,” meaning they may be converted into stock in the future. According to Wedbush analyst Michael Pachter’s estimates, this bond issuance will additionally issue about 46 million shares, while GameStop’s current outstanding share capital is 447 million shares, which means existing shareholders’ equity will be diluted by more than 10%. For a company with a market value of $12.7 billion, this dilution is akin to stabbing a needle into a price bubble.

Secondly, the “zero coupon” design of these bonds raises concerns among investors. Zero coupon means GameStop does not need to pay interest, but the returns for bondholders rely entirely on the price increase of Bitcoin. If Bitcoin performs poorly, investors may face the risk of losing all their capital. Worse still, GameStop’s traditional retail business continues to shrink—closing 590 stores in the U.S. in fiscal year 2024, with more closures expected in fiscal year 2025. The market is starting to doubt: does this company really have the ability to turn around with Bitcoin, or is it just “drinking poison to quench thirst”?

Retail investors’ sentiment has quickly shifted from “going to the moon” to “being cut like leeks”. On platform X, someone joked: “Is GME going to buy a coffin with Bitcoin?” Furthermore, some analysts pointed out that the market value of 12.7 billion dollars far exceeds its potential value of 4 billion dollars in cash plus 1.3 billion dollars in Bitcoin investments, making such a high valuation seem precarious after the financing details were revealed.

Act Three: The Shadow of MicroStrategy, the Shortcomings of GME

GameStop’s Bitcoin plan is clearly inspired by MicroStrategy, but the gap between the two is like a comparison between a marathon and a sprint. MicroStrategy has created a “Bitcoin ATM” through a variety of financing methods (stock issuance, convertible bonds, ATM mechanisms): selling stocks at a high premium to buy coins, then pushing up the stock price as Bitcoin rises, forming a capital closed loop. Founder Michael Saylor even made a vow of “never selling coins”, transforming the company into a “digital asset pioneer” and attracting institutional investors from around the world.

GameStop, on the other hand, has more of a Bitcoin strategy than a hasty parody show. The inflexibility of the $1.3 billion single bond issuance program directly exposes equity dilution risks, while MicroStrategy has a longer debt maturity (maturing as early as 2028) to withstand market volatility. What’s more, MicroStrategy has completely transformed into a Bitcoin company, and its software business is just an embellishment; GameStop’s core is still retail, and the wave of store closures in FY2025 shows that its fundamentals haven’t improved. Retail investors may be expecting $GME to replicate the miracle of MSTR, but the market is clearly not buying it: one is the far-sighted “alchemy of capital”, the other is the “meme speculation” of the stragglers.

The Bitcoin market environment could also be the last straw that breaks $GME’s back. If the Bitcoin price is weak after the announcement (real-time data verification needed), investor confidence in GameStop will further waver. In contrast, MicroStrategy holds 500,000 Bitcoins, which is enough to influence market expectations, while $GME’s $1.3 billion investment is just a drop in the ocean and hardly able to stir up a wave.

Act Four: Herding Effect and Market Judgment

As a representative of “meme stocks”, the stock price of $GME has never been a product of rationality, but an amplifier of retail sentiment. The March 25 rally was a classic herd effect: the Bitcoin boom was compounded by positive results, and retail investors flocked in, pushing stock prices higher. However, when the details of the $1.3 billion bond issue surfaced, profits quickly withdrew, and panic selling ensued. This “fast-in, fast-out” speculative model is the biggest difference between $GME and MSTR – the latter relies on institutional backing and long-term strategies to stabilize its position, while the former oscillates between retail frenzy and disillusionment.

Market analysts pointedly stated: “GameStop wants to learn from MicroStrategy, but forgets it is a meme stock. Retail investors can hype concepts, but they won’t pay for dilution and high valuations.” There are even comments jokingly saying: “$GME is treating Bitcoin as a lifeline, only to discover that the straw beneath it is an abyss.”

Epilogue: The Carnival Ends, Lessons Remain

The initial rise and subsequent fall of GameStop’s stock price is both a reflection of the Bitcoin craze and a collision between retail speculation and market rationality. The initial 14% increase stemmed from the fantasy of “Bitcoin transformation,” with retail investors viewing it as a new weapon against Wall Street; the following 25% crash was a wake-up call to reality—risks of dilution from $1.3 billion in debt, unsustainable high valuations, and the hollowing out of core business caused this frenzy to quickly come to an end.

The play tells us that Bitcoin may be the gold mine of the future, but not every company can mine gold. It took MicroStrategy five years to prove the viability of “capital + Bitcoin”, and GameStop’s hasty entry was more of a big gamble. In the future, if $GME fail to refine its financing strategy and reverse the retail decline, its Bitcoin dream may be short-lived. For investors, this is not only a roller coaster of stock prices, but also a vivid risk education lesson: between memes and reality, the market is always the final judge.