What happened

Shares of GameStop (GME -4.61%) are tumbling 6.7% at 10:40 a.m. EST on Tuesday, a day after the video game retailer launched its first digital wallet, which allows holders to easily access and trade their cryptocurrencies and non-fungible tokens (NFTs).

The wallet will also enable transactions on GameStop's NFT marketplace, which the retailer expects to launch in its fiscal second quarter.

Hands opening an empty wallet.

Image source: Getty Images.

So what

GameStop's turnaround is predicated on a transition to digital assets. As gaming increasingly moves to the cloud and to digital downloads, a retailer primarily centered around physical media is less relevant, and chairman Ryan Cohen has said turning GameStop into the "Amazon of gaming" could provide a meaningful base for future growth.

Since then, however, there have been little in the way of suggestions about how this will be achieved. The most that we saw before the launch of the Ethereum wallet was hints about the coming NFT marketplace.

Now what

GameStop still needs to show how its primary business can be transformed, because its earnings reports have yet to show any meaningful improvement. While revenue grew last quarter, losses widened significantly, and though its shares got a temporary boost from a planned stock split, the stock has since given back all of those gains.

Many meme stock traders have seized on the fact that GameStop said it wants to split its shares in the form of a stock dividend, believing it could ignite the "mother of all short squeezes," or MOASS, they've been waiting for. However, most splits are announced as dividends and have little bearing on anything other than a company's accounting.

Instead, investors will need GameStop to show how its business will change, and the market apparently doesn't think a digital wallet or an NFT marketplace is what's necessary, particularly in the face of the digital asset meltdown over the past few weeks.