GameStop (GME) Bitcoin Bet & RSI Hidden Bullish Divergence

GameStop (GME) has been quietly recovering for the past year, with the stock making higher lows (see chart above) on the weekly time frame. Meanwhile, its relative strength index (RSI, yellow) has formed lower lows – this is called a hidden bullish divergence. Put simply, the price has been climbing even though selling pressure has increased relative to buying pressure. In other words, sellers have been trying to push GME lower, but so far, they haven’t managed it. Now, with GameStop announcing plans to buy bitcoin, the stock looks more interesting for speculators.

The GameStop bitcoin bet explained

GameStop (GME) is a popular gaming retailer known for selling video games, consoles, and collectibles. But recently, it’s become better known as a favorite among speculators. The stock had a monster short squeeze in 2021 – jumping 2,440.8% in three weeks. 

Now, GameStop is jumping on the bitcoin bandwagon. The company announced on Tuesday that its board unanimously approved a plan to start holding bitcoin in its corporate treasury. They haven’t said how much bitcoin they plan to buy (or when). But according to its latest earnings report (also released Tuesday), GameStop has about $4.8 billion in cash and securities. That gives it plenty of firepower to potentially pile into bitcoin.

GME seems to be taking a page out of MicroStrategy’s bitcoin strategy. That massively boosted MicroStrategy’s stock price over the past few years, and perhaps GameStop is hoping for something similar.

GameStop’s full-year earnings breakdown (2024)

GameStop had an interesting year, according to its latest earnings report. Total sales dropped from $5.27 billion in 2023 down to $3.82 billion in 2024. But despite those lower sales, the company’s profits increased. Net income (income left after spending) rose from just $6.7 million to more than $131 million.

That’s mostly down to simple cost-cutting. It slashed spending on staff, admin, and store overhead (known as SG&A expenses) from $1.32 billion to $1.13 billion. That meant even though it sold fewer products, it kept more revenue as profit.

Is GME stock a buy?

Like I said, the stock does look interesting for speculators – but brace yourself for volatility either way. GameStop is already a wild stock, and bitcoin isn’t exactly tame either.

GME’s price chart does have some bullish features: the price is making higher lows with hidden RSI bullish divergence. But keep an eye on the 50-week moving average (average price over the past 50 weeks). The chart below shows how the 50-week moving average has been a pretty good gauge of GME’s trend in the past. The stock is trading above the moving average for now. 

But with a stock that can move out of nowhere on a whim, technical analysis might not always work.

If you want to learn how to trade with the RSI, download our free PDF guide below.

Key takeaways

• GameStop (GME) could start buying bitcoin – copying MicroStrategy’s bitcoin play.
  
• GameStop sold fewer products in 2024 but boosted profits by cutting costs.
  
• GME stock has bullish technical signals (hidden RSI bullish divergence with higher lows), but it’s a wild stock. Expect volatility.

As usual, none of this is investment advice. If you liked this piece, check out my free newsletter for how-to guides and investment insights across crypto, stocks, metals, and more.