In brief
- Depending on how they raise funds, Bitcoin treasury firms may eventually be forced to sell the asset.
- Observers say that these firms may also become a target for acquisitions.
- For smaller firms, copying Strategy’s playbook may require a meaningful amount of time.
Distillers, cannabis producers, and energy storage firms are among a wave of publicly traded companies loading their balance sheets with Bitcoin, but observers say that the strategy carries great risk if the asset’s price falls to certain levels or their ability to raise cash becomes constrained.
They might then be forced to sell their holdings, potentially at a discount, or even the firm itself.
“There might be an opportunity for highly credit-worthy operating companies to go and consolidate this industry and go buy Bitcoin for 90 cents on the dollar if they’re distressed,” Ben Werkman, chief investment officer at financial services firm Swan Bitcoin, told Decrypt. “If you’re looking at a prolonged bear market, that could be a real possibility.”
Experts’ wariness comes as a fast-growing number of companies build treasuries based on Bitcoin and other digital assets, an approach popularized by Strategy, formerly MicroStrategy, to great success. But the possible downside has been largely overlooked as Bitcoin has soared, alongside the share price of some newly Bitcoin-focused firms.
Earlier this month, Geoff Kendrick, head of digital asset research at U.K.-based bank Standard Chartered, wrote in a note that “Bitcoin treasuries are adding to Bitcoin buying pressure for now, but we see a risk that this may reverse over time.”
The number of companies trying to follow Strategy’s path, leveraging debt as a way to buy more Bitcoin than they otherwise could, has mushroomed under the more crypto-friendly policies of U.S. President Donald Trump. Strategy began purchasing Bitcoin in 2020, and over the course of several years, it has issued convertible bonds, common stock, and preferred shares to fund acquisitions—a playbook that several nascent firms are trying to emulate.
Strategy, which has seen its share price skyrocket over 2,500% since it started pivoting away from software development, owns roughly 582,000 Bitcoin worth just over $61 billion, accounting for 2.7% of the asset’s total possible supply.
Among 130 public companies, no other owns more than 0.25% of the 21 million Bitcoin that advocates say will ever be mined, according to Bitcoin Treasures. At the beginning of this year, only 75 public companies held Bitcoin, an archived version of the website shows.
