Bitcoin Treasury Companies Face BTC Volatility Risk, Says Standard Chartered: Here's Where They Could Liquidate

Standard Chartered Global Head of Digital Assets Research Geoffrey Kendrick has warned of risks to the Bitcoin treasury strategy.
New entrants into the space are particularly vulnerable.
Kendrick has said that forced liquidations are likely in the face of volatility.

The Bitcoin treasury company trend continues to spread like wildfire. Almost every week, a new corporation appears, announcing plans to stockpile the leading digital asset. Last week, it was Trump Media DJT and Norwegian cryptocurrency trading firm K33. This week, it is Canadian energy firm SolarBank.

These firms view the Bitcoin treasury strategy as a surefire way to grow shareholder value, inspired by the success of Michael Saylor’s MicroStrategy MSTR. Most Bitcoiners have cheered them on, as it has led to increased demand. This demand has been the primary driver of Bitcoin’s upward momentum over the past few months.

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But Standard Chartered Global Head of Digital Assets Research Geoffrey Kendrick is warning of risks.

“Bitcoin treasuries are adding to Bitcoin buying pressure for now, but we see a risk that this may reverse over time,” he said in a note to investors on Tuesday.

Including MicroStrategy, about 61 firms are pursuing this Bitcoin treasury strategy, Kendrick estimated. These firms currently hold nearly 674,000 BTC, worth approximately $71 billion.

Kendrick warned that the fuel for the Bitcoin treasury strategy, which is the premium at which the stock of most of these firms trades to the value of their BTC holdings, was unlikely to be sustainable. Noting that current access hurdles were the justification for the premium, he said that as the asset became more easily accessible and normalized, institutional investors would be unlikely to need proxies, making the premium unsustainable.

This, he said, would lead to “downward pressure on the equity prices of the Bitcoin holders.”

Meanwhile, Kendrick said these firms, particularly new entrants into the space, face an even more immediate threat: Bitcoin volatility.

“BTC volatility suggests that a move lower – below the average purchase prices for some Bitcoin treasuries – is probable in the nearer term,” he said. “Indeed, at current average purchase prices for Bitcoin treasuries, it would only take a move back below USD 90,000 to put half the Bitcoin treasuries (by number of companies) underwater.”

And Kendrick does not believe that these firms have a high pain threshold. According to the researcher, a 22% drop below average purchase prices could turn newer Bitcoin treasury firms into “forced sellers.” These firms have doubled their Bitcoin holdings from 50,000 BTC to 100,000 BTC, worth roughly $11 billion in the past two months, said Kendrick.

Kendrick cites the 2022 bear market actions of Bitcoin miner Core Scientific CORZ in his reasoning. In the run-up to the bear market, the firm had maintained a no-BTC selling policy, opting instead to raise capital to cover operations, much like today’s treasury firms. But as the asset crashed in 2022, it was forced to sell at a loss and restructure its debt.

“Core Scientific sold 7,202 Bitcoins at an average price of USD 23,000 in June 2022. At that time, we calculate that Core Scientific was mining Bitcoins at an average cash cost of USD 29,600. The forced sale price (forced in the sense that creditors would no longer fund Core Scientific’s business model) was just 22% below the cost of production,” Kendrick said.

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