Many companies adopt aggressive strategies to buy Bitcoin, depending on the stages of the strategy (formerly Microstrategy). However, Digital Asset Bank Sygnim has raised alarms on the risks associated with these so-called Bitcoin acquisition vehicles.
The bank has warned that if these companies aim to capitalize on the growing value of Bitcoin, their leverage approaches could destabilize the markets and attract a regulatory examination.
Bitcoin Business Purchase: A tendency to follow?
Beincrypto recently reported that at least 61 companies with different main companies had adopted Bitcoin as reserve assets. In addition, this trend does not seem to slow down. In fact, many new companies have been established with commercial models centered on the accumulation of Bitcoin.
Unlike traditional companies with diversified operations, these companies operate in a similar way to investment funds, by raising capital specifically to acquire the largest cryptocurrency. According to Sygnum research, this approach has led to the increase in the Bitcoin price by attracting additional investments, in particular with investors who are looking for indirect exposure to digital assets.
Nevertheless, Sygnim warns that the BTC-Per-Share growth model is not durable indefinitely. The high dependence on the leverage, loan or equity issuance to finance Bitcoin purchases exposes these companies to significant risks.
A lowering turn on the cryptocurrency market or a request tray could force these companies to liquidate their Bitcoin assets to cover debts or respond to investor buyouts. Extreme Bitcoin price reductions can prevent debt repurchase, resulting in risk of insolvency.
In addition, liquidations could trigger high price reductions, potentially destabilize the wider market of cryptocurrencies and erode the confidence of investors.
“A saturation of demand associated with a crypto bear market can lead these vehicles to sell bitcoin which would exacerbate an already existing downward trend in the price of bitcoin – both because of the sales pressure and because of the impact that it would have on feeling.” Michael Saylor selling bitcoin “would be a last difficult title for the crypto market”, Last report.
Regulatory risks remain a significant concern. Sygnim stressed that Bitcoin cash companies are implementing an investment strategy but are generally not regulated as financial institutions, which could expose them to potential regulatory challenges.
“Although the current political and regulatory climate in the United States decreases this risk (or could only lead to very minimal sanctions, if applicable), the future elections could move the balance,” added the bank.
The report also stressed that the concentration presents risks. Sygnim explained that large assets of Bitcoin by a few entities could reduce the liquidity of Bitcoin and increase volatility. In addition, he could undermine his appeal as a reserve ratio for central banks.
“Important and concentrated assets are a risk for any active and at this stage (microphone) strategy, assets are approaching a point where they become problematic, the company holding almost 3% of the total bitcoin never issued, but a much higher share of real cash supply,” wrote Sygnum.
Consequently, the rise of Bitcoin acquisition vehicles reflects the growing institutional interest for cryptocurrencies but also highlights the speculative nature of these strategies. The success of the strategy has inspired imitators, but not all of them can have financial resilience to market fluctuations.
In addition, Beincrypto noted that the proliferation of these companies signals a maturity market. However, their aggressive tactics could exacerbate volatility in a class of unpredictable assets. Sygnim’s warning recalls that if Bitcoin acquisition vehicles can generate short -term gains, their long -term viability remains uncertain.
Non-liability clause
In membership of the Trust project guidelines, Beincrypto has embarked on transparent impartial reports. This press article aims to provide precise and timely information. However, readers are invited to check the facts independently and consult a professional before making decisions according to this content. Please note that our terms and conditions, our privacy policy and our non-responsibility clauses have been updated.
