Controversy Arises Over Public Company Encryption Treasury Strategy: Innovation or Risk?

Encryption treasury has become a new trend among listed companies. According to statistics, at least 124 listed companies have incorporated Bitcoin into their financial strategies as an important component of their balance sheets. At the same time, some companies have also begun to adopt other encryption currencies such as Ethereum, Sol, and XRP as part of their treasury strategies.

However, some industry insiders have recently expressed concerns about this trend. They compared these listed investment tools to the Grayscale Bitcoin Trust (GBTC) from back in the day, which traded at a premium for a long time, but when the premium turned into a discount, it became the catalyst for the collapse of several institutions.

A digital asset research director at a certain bank has warned that if the price of Bitcoin falls below 22% of the average purchase price of companies adopting encryption treasury strategies, it may trigger forced sell-offs by enterprises. If Bitcoin drops below $90,000, about half of the companies' holdings may face the risk of losses.

MicroStrategy Leads the Trend, But There Are Risks Behind the High Premium

As of June 4, a certain company holds approximately 580,955 Bitcoins, with a market value of about $61.05 billion, but its company market value is as high as $107.49 billion, with a premium close to 1.76 times.

In addition, some companies adopting Bitcoin treasury strategies also have impressive backgrounds. One company, supported by a well-known investment firm and a stablecoin issuer, went public through a SPAC, raising $685 million entirely for the purchase of Bitcoin. Another company, founded by the CEO of a crypto media outlet, merged with a publicly listed medical company, raising $710 million to buy cryptocurrency. Additionally, a media technology group announced it has raised $2.44 billion to create a Bitcoin treasury.

However, some industry insiders point out that the operating models of these companies are structurally very similar to the GBTC arbitrage model of the past. Once the market turns bearish, their risks may be released in a concentrated manner, forming a "stampede effect."

The Cautionary Tale of GBTC: Leverage Collapse Leading to Institutional Blowups

Looking back at history, GBTC once enjoyed great popularity from 2020 to 2021, with a premium that reached as high as 120%. However, entering 2021, GBTC quickly turned into a negative premium, ultimately becoming the catalyst for the explosion of several encryption institutions.

The mechanism design of GBTC is a "one-way transaction with only inflow and no outflow": investors must lock their investments for 6 months after purchasing in the primary market before they can sell on the secondary market, and they cannot redeem it for Bitcoin. This design attracted a large number of investors in the early stages, but it also gave rise to large-scale "leverage arbitrage games."

When the market turned, this operating model collapsed instantly. Many institutions had to continue losing money in a negative premium environment, ultimately leading to liquidation or bankruptcy. This "explosion" that began with a premium, flourished with leverage, and was destroyed by a liquidity collapse, became the prologue to the systemic crisis in the encryption industry in 2022.

Public Company Encryption Treasury: Innovation or Risk?

More and more companies are forming their own "Bitcoin treasury flywheel", with the main logic being: stock price rises → additional financing → purchase BTC → boost market confidence → stock price continues to rise. This mechanism may accelerate as institutions gradually accept encryption currency ETFs and encryption currency holdings as collateral for loans.

However, some believe that this model essentially ties traditional financial instruments directly to the prices of encryption assets, and once the market turns bearish, the chain may break. If the coin price plummets, the company's financial assets will rapidly shrink, affecting its valuation and financing capabilities. More seriously, when the stocks of these companies are accepted as collateral, their volatility will further transmit to the traditional financial or DeFi systems, amplifying the risk chain.

Nevertheless, some analyses suggest that we are still in the early stages, as most trading institutions have yet to accept Bitcoin ETFs as margin collateral.

For the risk assessment of a well-known company, some opinions suggest that its capital structure is not a traditional high-risk leverage model, but rather a highly controllable "ETF-like + leverage flywheel" system. The company purchases Bitcoin through various financing methods, creating a volatility logic that continuously attracts market attention. More importantly, the maturity dates of these debt instruments are mostly concentrated in 2028 and beyond, which means there is almost no short-term debt repayment pressure during cyclical pullbacks.

Overall, the treasury strategy of publicly listed companies regarding encryption is increasingly becoming a market focus, which has also sparked debates over its structural risks. Although some companies have constructed relatively robust financial models through flexible financing methods and periodic adjustments, whether the overall industry can maintain stability amid market fluctuations remains to be seen. Whether this round of "encryption treasury craze" will repeat the mistakes of GBTC is still an unresolved question.