Corporate Bitcoin treasury holders prepare for fire sale

After months of aggressive accumulation, market conditions are pushing Bitcoin treasury firms to sell.
Summary

• Crypto treasury firms are preparing for a fire sale of their crypto assets
• Stocks of major treasury firms are trading below their digital asset holdings
• Sales of these assets could create a vicious cycle for the crypto market

Digital asset treasury firms, including those holding Bitcoin, are starting to sell their assets. Falling valuations, risk-off sentiment in the market, and volatile crypto prices are changing their underlying economics. According to a Wednesday, November 26 report by the Financial Times, this could cause a vicious cycle for crypto assets.

So far, treasury firms like Strategy, the largest corporate Bitcoin (BTC) holder, have relied on a simple loop. Firms would buy up digital assets, and their shares would go up by a larger margin. They would then use their shares to buy more crypto. Now, this cycle threatens to invert.

Shares of Strategy, Metaplanet, and other major treasury firms are trading below the net asset value of their digital asset holdings. For instance, Strategy holds $56 billion in Bitcoin, while its market cap is just $49 billion.

Bitcoin treasury firms are ready for a fire sale

This development, caused by risk-off sentiment and their leveraged positions, is incentivizing them to sell their crypto treasury and buy their own shares. However, the impact on the crypto markets could be severe, triggering a vicious cycle of falling stock prices that, in turn, depresses crypto asset prices.

“There’s going to be a fire sale at these companies; it’s going to get worse,” said Adam Morgan McCarthy, senior research analyst at crypto data firm Kaiko. “It’s a vicious cycle. As soon as the prices start tanking, it’s a race to the bottom.”

Still, it is essential to note that not all treasury firms will opt to sell their assets. Strategy, notably, has permanently shrunk its Bitcoin holdings and has only ever briefly sold for tax purposes. Still, if current conditions persist, the market may be forced to act.