Dozens of companies are borrowing to buy Bitcoin What will happen when the price falls?
The loss waterfall could trigger a deep cyclical bearish market.
The massive institutional adoption of Bitcoin (BTC) in recent months has been a fundamental part of the increase that the digital currency has had, which has been appreciated 31.5% so far this year. Until now, more than 200 entities accumulate BTC as treasury assets.
Charles Edwards, CEO of the investment firm Capriole Investments, He said that these BTC treasurer companies (whose business model is the same accumulation of BTC) suppose, in themselves, The “highest risk” for the Bitcoin market and its price in the current cycle.
In the analyst’s opinion, the risk falls on the indebtedness of these corporate entities to acquire bitcoin. In cryptonotics we have reported that these entities follow the example of Strategy, a company that has borrowed up to USD 2,000 million to buy BTC.
Other entities such as Metaplenet, Mara Holdings, Gamestop and Trump Media & Technology Group (TMTG), to mention some, have also issued corporate debt to join the trend and buy Bitcoin.
There is so much the influence that, to date, 1.2 million Bitcoin, equivalent to 5.7% of the maximum currency supply, which is 21 million units, are in corporate hands. Discriminatedly, 976,132 BTC in stock exchange companies and 294,101 BTC in private companies, according to data of bitcintreasuries.
The above shows that, in recent months, a corporate fever by Bitcoin has been unleashed, with companies in Latin America, the United States, Asia and Europe adopting BTC as a reserve and appealing to debt for their acquisitions.
In that order of ideas, for Charles Edwards, if enough treasury companies are too close to buy more BTC, at the time the price receded could generate a massive “bearish waterfall” that It would be “more than enough” to trigger a “deep cyclical bearish market.”
It is a “systemic risk” that is around companies that have Bitcoin treasures, since a dominated effect scenario can occur if a company with thousands of coins begins to get out of their BTC holdings. Such a situation would not only impact the cryptocurrency market, but to the assessment of companies itself, as the so -called “virtuous circle” would end.
It must also be taken into account that many of these companies with Bitcoin treasures were, in essence, financial zombies. That is, companies in a critical state and that They joined the trend of BTC reserves To grab flight. According to Exchange Bitmex analysts, these entities run the risk of losing their status and being “dead dead.”
Alerts have time
It is not the first time that Edwards goes out to warn of the risks of Bitcoin’s treasury companies. Two weeks ago, the analyst said that many of these companies entered the market with purchase prices of USD 100,000 for each BTC, which leaves them little room for maneuver if the price stagnates or falls.
He also warned that, if the number of participants grows, the competition will also do so, reducing the capacity of corporations by attracting new capital and leading them to expand their debt to buy BTC, increasing their risks.
A similar alert was that issued by analyst Henrik Zeberg, who warns that the presence of BTC in traditional portfolios could even deepen the financial crisis that, according to him, is on his way.
And something similar expressed the influencer Manuel Terrones Godoy, who warned that companies that have opened treasury from both Bitcoin and other cryptocurrencies, are a real “financial bubble” that could explode when the bearish market arrives.
Thus, warnings are more than clear. Bitcoin’s corporate treasury, although they could paint as beneficial for BTC, also involve a risk that must be evaluated. However, they could also be an opportunity to take advantage and, why not, make much more visible to the ecosystem.
