Encryption Treasury Strategy: The New Favorite of Listed Companies and Potential Risks

Encryption treasury has become a popular strategy for listed companies. According to statistics, at least 124 listed companies have incorporated Bitcoin into their financial strategy as an important asset on their balance sheets to attract market attention. Meanwhile, some companies have also begun to adopt treasury strategies involving cryptocurrencies such as Ethereum, Sol, and XRP.

However, industry insiders have recently expressed concerns about this trend. They compare these listed investment tools to the former Grayscale Bitcoin Trust (GBTC), which shifted from a long-term premium to a discount, becoming the trigger for the collapse of several institutions. The head of digital asset research at a certain bank warned that if Bitcoin prices drop significantly, it could force companies to sell off their holdings, potentially putting half of the companies' positions at risk of losses.

The Attractiveness and Risks of Financial Vault Strategies

A certain technology company holds about 580,955 bitcoins, with a market value of approximately 61.05 billion USD, but its company valuation reaches 107.49 billion USD, resulting in a premium close to 1.76 times. This high premium has attracted many imitators, including emerging companies supported by well-known investment institutions, as well as some publicly traded companies planning to purchase Ethereum, SOL, and XRP.

However, industry insiders point out that the operating models of these companies are similar to the GBTC arbitrage model, which may trigger a "cascading effect" during a bear market. This effect refers to a chain reaction where investors panic-sell collectively when there are signs of a decline in market or asset prices, leading to further price plummets.

Historical Lessons from GBTC

Looking back at history, GBTC was once a shining star from 2020 to 2021, with a premium as high as 120%. However, after 2021, GBTC quickly turned to a negative premium, becoming the trigger for the collapse of several encryption institutions.

The mechanism design of GBTC is a "one-way transaction that only allows entry and not exit": investors must lock up their investment for 6 months after purchasing in the primary market before they can sell in the secondary market, and they cannot redeem it for Bitcoin. This design has driven a long-term premium in the secondary market, but it has also led to large-scale "leveraged arbitrage games."

When the market environment changes, this operating model collapses rapidly. Many institutions suffered huge losses as a result, triggering a systemic crisis in the encryption industry in 2022.

The Future of Public Company Encryption Treasury

More and more companies are forming their own "Bitcoin treasury flywheel". The main logic is: stock price rises, additional financing, purchase of BTC, boosting market confidence, and continued rise in stock prices. This mechanism may accelerate as institutions gradually accept encryption currency ETFs and encryption currency holdings as collateral for loans.

However, critics argue that this model essentially ties traditional financial instruments directly to the prices of encryption assets, which could trigger a chain reaction once the market turns bearish. If the price of coins plummets, the company's financial assets will quickly shrink, affecting valuation and financing capacity, potentially forcing the sale of BTC, further driving down prices.

Worse still, if the stocks of these companies are accepted as collateral, their volatility could further transmit to the traditional financial or DeFi systems, amplifying the risk chain.

Conclusion

The strategy of publicly listed companies using encryption treasury is becoming the market focus, also sparking controversy over its structural risks. Although some companies have built relatively robust financial models through flexible financing methods, whether the overall industry can maintain stability amid market fluctuations remains to be seen. Whether this round of "encryption treasury boom" will replay the risk path of GBTC remains an open question.