The bitcoin corporate treasury race might turn into Hunger Games for some
Not everyone can be Strategy.
Let the bitcoin treasury games begin! (Or at this point, continue.) The mind-blowing pace of new companies adopting a digital asset treasury strategy includes not only financial companies, but a slew of other businesses, including a Spanish coffee chain, a gold miner, and a Jaguar and Land Rover restoration company.
Norway-based deep-sea mining firm Green Minerals is one of the latest entrants, announcing this week it aims to raise up to $1.2 billion to purchase bitcoin.
But as the race heats up, some experts are raising alarms, noting that not everyone can successfully emulate Strategy, the largest corporate bitcoin holder. And this race to stockpile could quickly turn into a Hunger Games scenario, leading the weaker entrants to disaster.
A name change, a rebranding, or a strategic shift is not a magic wand for a successful bitcoin pivot. A few companies that have recently tried to mimic Strategy underscore this. Take GameStop for example, which bounced on its first acquisition roughly a month ago before dropping double digits. As Luke Kawa wrote, the power of the pivot to bitcoin may be wearing off. GameStop is down 31% in the past month.
“It does make sense that all these companies are scrambling to add bitcoin to their treasuries, because they can see the writing on the wall for the US dollar. But at the same time, many of these random companies are simply doing this for PR purposes in the hopes of emulating Strategy’s success,” Nic Puckrin, founder of Coin Bureau, told Sherwood News.
Puckrin also said that in the process, they’re agreeing to much worse terms when they issue their bonds or equity and buying at a much higher average price.
“My estimate would be that bitcoin will reach a peak of around $150,000 this cycle,” he said, adding that if bitcoin then plummets 30% to 40% during a downturn, it’s not known if these companies will hold (as Strategy does) or create enormous selling pressure by all offloading at once.
“Strategy’s model is entirely different and these new models are looking increasingly more unsustainable,” Puckrin said.
Another driver of this accumulation phenomenon is the devaluation of the dollar, Elliot Johnson, CEO of Bitcoin Treasury Corporation, told Sherwood. “And smart companies are responding by shifting their treasuries into bitcoin — a universal digital currency with a finite supply that has risen 78% over the past year, even as USD has plummeted,” Johnson said.
“Just compare the bitcoin price chart with the dollar’s since its inception — and that’s all any qualified CFO needs to know,” he added.
This race could also have market implications. David Duong, Coinbase’s global head of research, dubbed it the “attack of the clones,” noting that “approximately 228 public companies hold a total of 820k BTC on their balance sheets worldwide.”
Duong argues that one issue could have several significant market consequences, “both around potential demand for crypto but also around systemic risks for the crypto ecosystem,” namely due to forced selling pressure and motivated discretionary selling.
In any case, these warnings are not deterring companies from entering the fray:
London-listed Bluebird Mining Ventures, a company formerly focused on “bringing historic mines back into production,” announced today a £2 million ($2.22 million) facility with an “immediate £1million [$1.36 million] to facilitate the company’s initial bitcoin strategy purchase.” Bluebird also announced that, “subject to final agreement,” it will purchase 746 bitcoin mining machines.
ECD Automotive Design, the world’s largest Land Rover and Jaguar restoration company, announced earlier this week a $500 million facility “earmarked for the strategic accumulation of bitcoin to serve as the company’s primary reserve asset.”
