The popularity of corporate cryptocurrency reserves marks a new era in the financial sector, comparable to the emergence of leverage and ETFs, yet it conceals certain risks. This is stated in a report by Presto’s Head of Research, Peter Chang.
“Some crypto treasury companies (CTCs) won’t become diamonds, but that doesn’t necessarily mean the market has become riskier. Managing this risk entirely depends on each CTC’s ability to anticipate cash flow needs and structure capital to sustain and grow crypto assets. The market will reward those who succeed with higher NAV multiples and punish those who fail,” the analyst stated.
The term CTC refers to public organizations that prioritize accumulating cryptocurrency as a primary driver of shareholder value, financed through public capital markets. It excludes companies whose core value stems from traditional operations with partial crypto treasury assets (e.g., Tesla, Coinbase, or miners).
The Strategy-inspired treasury model has gained traction, particularly in the U.S., which benefits from deep capital markets and experienced institutional investors, Chang noted. Such organizations are typically structured as former operating firms, SPACs, or shell companies repurposed to accumulate cryptocurrency.
The rapid rise of CTCs has raised concerns that leveraged firms could trigger a new wave of forced liquidations if the crypto market enters a bearish phase.
Chang identified two main risks: collateral liquidation and “activist attacks” — hostile takeovers aimed at profiting from NAV shortfalls. However, these concerns are more limited than those that fueled past cycle shifts such as the Terra collapse.
“While an overly stretched premium may indicate a bubble, limited historical data for most crypto treasury companies makes it difficult to determine what level of premium qualifies as excessive. The recurring nature of accumulation implies that some premium is justified. Moreover, unlike closed-end funds, CTCs can use capital markets to increase their crypto assets per share through innovative financing,” Chang clarified.
According to the researcher, managing cryptocurrency strategies is a complex task. Therefore, some new and inexperienced participants may face difficulties during downturns. Ultimately, the key risk is not the market itself, but how well each player plans for unpredictable funding needs, Chang concluded.
As a reminder, Coinbase recently called the growing popularity of corporate bitcoin reserves both the main trend and a risk for the crypto market.
