Bitcoin Reserve Strategy: Opportunities and Risks Coexist

More and more publicly traded companies are incorporating Bitcoin into their balance sheets. While this practice presents opportunities, it also carries significant risks. If the price of Bitcoin falls sharply or the company's fundraising ability is limited, these companies may be forced to sell Bitcoin at a low price, or even sell the company itself.

The Chief Investment Officer of a financial services company stated that if the bear market persists for a long time, some reputable operating companies may have the opportunity to acquire distressed Bitcoin reserve companies at discounted prices, thereby consolidating the industry.

As more companies adopt this strategy, experts remain vigilant. This practice was initially adopted and successfully implemented by a software company, but as the price of Bitcoin soared and the stock prices of some emerging companies rose, the potential risks were largely overlooked.

The head of digital asset research at a certain bank pointed out in a report that the current Bitcoin reserve strategy has increased the buying pressure on Bitcoin, but this situation may reverse in the future.

Against a backdrop of favorable policies for cryptocurrencies, the number of companies attempting to emulate pioneers by borrowing to purchase Bitcoin has surged. This strategy has been emulated by several emerging companies, primarily by issuing convertible bonds, common stocks, and preferred stocks to fund acquisitions.

According to data platform statistics, among the 130 publicly listed companies holding Bitcoin, none have a holding that exceeds 0.25% of the total Bitcoin supply. At the beginning of this year, only 75 listed companies held Bitcoin.

The CEO of a certain asset management company stated that if Bitcoin reserve companies were to go bankrupt, there could be a loss of 50% of the principal. He believes that the possibility of this risk occurring in the future is quite high and needs to be closely monitored. However, at present, this risk is relatively low, and its potential destructive power will not exceed that of ordinary derivative liquidation events.

The research director of a trading platform believes that the pressure to sell off forcibly in the short term is not the main issue, and refinancing methods may ultimately help leveraged companies avoid liquidating their Bitcoin holdings.

Most companies adopting a Bitcoin reserve strategy aim to maximize shareholder value by increasing the number of Bitcoins held per share. However, shareholders do not have direct claims on the Bitcoins in these companies' reserves.

Small companies may take a long time to reach the scale of issuing convertible bonds. An expert pointed out that companies first need to have a strong options market, which depends on factors such as stock trading volume. Some companies are using bank term loans as an alternative, but this may force them to sell Bitcoin under certain conditions.

mNAV( Market Value to Net Asset Value Ratio ) has become an informal but popular measure for assessing Bitcoin reserve companies. However, some analysts believe that this metric is not ideal as a comprehensive indicator, as it does not adequately consider the differences in operating companies and capital structures.

When a company's stock price is at a premium relative to its Bitcoin holdings, it is relatively easy to increase the value of each Bitcoin per share by issuing common stock. However, if this premium turns into a discount, the company's prospects may change accordingly. For emerging Bitcoin reserve companies, the value of their underlying business is very important in the early stages.

Some companies choose to exchange cash and US Treasury bonds for Bitcoin in order to maintain their purchasing power, which is similar to the logic behind certain state-level Bitcoin bills.

As more and more Bitcoin reserve companies emerge, investors may begin to categorize them as "growth" and "value" companies based on the expected growth rate of Bitcoin per share. Although smaller companies may eventually be acquired, their development direction may evolve into a new asset class alongside Bitcoin.

This emerging trend reflects some companies choosing to exit the traditional financial system and instead engage in what they believe to be a new financial system that represents the future. In this new field, first-mover advantage may bring significant opportunities.