Regardless of what the latest tech or investment enthusiasm is, a danger that goes back centuries is imprudent leverage. An investment firm focused on digital assets and cryptocurrencies flags a concern about the growing use of bitcoin and other entities as reserves on corporate balance sheets.

There’s a potential problem brewing in the digital assets world – the boom in “bitcoin treasuries” or “digital asset treasuries” (DATs) that have been used by hundreds of publicly-listed companies as a balance sheet reserve asset.

Most of these companies are in the US, but organisations in the UK, Canada, Japan and Hong Kong are also involved.

This boom is alarming bankers. A few says ago, Nickel Digital Asset Management, a European hedge fund manager specialising in the field, issued results of a poll among bankers about the use of bitcoin treasuries. It found that 32 per cent of respondents agreed that the growing trend is a “time bomb” for the digital asset ecosystem; 29 per cent said crypto treasury companies are attractive, but fragile.

According to Nickel Digital AM, at the core of the worry is that bitcoin treasury companies, which hold the cryptocurrency as a significant portion of their corporate treasury reserves, could pose a risk through the amplified volatility and risk of systemic shocks if they have highly leveraged balance sheets. Some bitcoin treasury companies can rely on acquiring bitcoin using capital raised from public equity or debt markets. This could create a dangerous feedback loop if the cryptocurrency falls sharply.

To gather views, the poll was conducted among senior investment bankers in the UK, US, Singapore and Switzerland. 

Nickel Digital AM says that figures (source: BitcoinTreasuries.net) show that the number of bitcoin held by publicly listed companies is around 1.01 million with 190 companies holding it on their balance sheets. It estimates a further 139 entities including governments, private companies, exchange-traded funds and other funds, exchanges and custodians, and decentralised finance (DeFi) smart contracts hold bitcoin.

A big play 
Software group Strategy – the US company formerly known as Micro Strategy – dominates the area, holding about 70 per cent of the market, benefiting a first-mover advantage. In its second-quarter results, Strategy said operating income skyrocketed by 7,106 per cent on a year ago to $14.03 billion. The firm said it logged a bitcoin (BTC) yield of 19.7 per cent in the second quarter, and 25.0 per cent since January, against its revised full-year 2025 target of 30 per cent.

Success like this breeds imitators.

“The proliferation of “copycat” firms replicating MSTR playbook can represent an issue and a ticking time bomb,” Anatoly Crachilov, CEO and founding partner of Nickel Digital AM, told this news service in an interview about the poll’s findings. There are over 100 public companies that had launched variations of [the] Micro Strategy model, with even greater number in the pipeline," he said. “There is a massive pipeline of companies looking to launch into this business.”

The rise of digital assets treasury (DAT) companies became a widespread phenomenon of 2025. Crachilov said that in the MicroStrategy case, the firm's share price of MSTR is highly correlated to the bitcoin price. In fact, the volatility of its stock is higher than bitcoin, he continued. 

Attraction
Crachilov said that a public company whose main business is focused on accumulating a stockpile of BTC, becomes an attractive access point for three major group of investors: 

(a) those unable to access bitcoin directly for regulatory reasons or due to restricted investment mandate; 
(b) speculative capital seeking a high volatility play, and 
(c) investors seeking to accumulate BTC through MSTR’s ability to increase BTC per share, one of the metrics pursued by MSTR. 

Furthermore, in certain countries, such as Japan, the demand is additionally fuelled by tax advantages of holding bitcoin via DATs rather than directly (because price appreciation is taxed on a m-t-m basis, irrespective of whether the asst is sold or not), Crachilov said. This explains their growth in certain markets. In the US, however, tax is not as significant a driver. The financial engineering is.  

“Public companies, often those in operational decline and underperforming their core business, are seeking to boost their (often dormant) share price by converting themselves into DAT vehicles, resulting in (at least initially) a price spike, often trading at significant multiple to net asset value,” he said. “For example, MetaPlanet, a small Japanese real estate company, saw a massive price boost after converting itself into a DAT company and traded at the multiple of 8.4 times earnings in June 2025, before falling back to 1.14x by September.”

To acquire bitcoin (or increasingly a wider spectrum of crypto assets), a DAT company raises capital either through new ATM share issues, various convertible bonds structures or an outright senior debt financing. 

The convertible bonds can carry a very low rate but with the embedded convertibility option, allowing convertibility into the company’s stock at certain predetermined price level (such as a 35 per cent premium to current price). Given the high volatility of the underlying stock, this optionality can be highly attractive for hedge funds, which became a large player in the space, Crachilov said. 

While on one hand this leads to a greater institutional adoption, the stability of their capital structure may impact overall sector development, he said.

Echoes of the SPAC surge
Crachilov agreed with WealthBriefing’s suggestion that in a way there was a parallel with the surge of interest a few years ago in Special Purpose Acquisition Companies (SPACs). The sector cooled rapidly after a boom of several months about four years ago, affected in part by critical comments from the Securities and Exchange Commission. SPACs are also sometimes called blank-cheque companies that are created with the purpose of merging with a private company within two years of the listing.

Asked about the possible concern that the SEC and other regulators might have about bitcoin treasuries and the like, Crachilov said a bigger problem is the financial sustainability of these companies and their ability to withstand significant price correction, without being forced to liquidate their holdings, further exacerbating a possible crisis. 

“Shares [of the companies] need to trade at a premium to net asset value for the sponsor to be able to issue new ATMs, without severe dilution impact to the existing shareholders.” he said. “If share price trades at the premium to bitcoin-per-share, then it becomes financially attractive for the DAT to issue new shares. However, once the premium collapses to par, the new issuances become less attractive (and dilutive if it slides into discount).”

If the share price falls, a DAT company would not necessarily collapse under such circumstances, but expansion will get hampered. If a stock trades at significant discount to NAV, a company might need to liquidate some of its crypto holding or may become a subject of acquisition by a larger rival. 

Crachilov said the capital structure of these companies represents an important indication of their long-term stability; most use covenant-lite bonds, with varying maturities and some have already converted into stock. However, the newly-launched DAT companies might engage in a risky fundraising (to catch up with wider rivals, while lacking established credibility with the market), thus funding themselves through short-maturity senior debt. Such a capital structure might be prone to significant pressure at the time of market distress.  

“It has to be noted that most of the financial flow entering such structure is a mercenary capital, i.e. highly opportunistic, short-term, and fluid in its nature” he said.

Today, about 850,000 bitcoins are held by DAT companies, a 40 per cent rise from 600,000 held at the start of 2025. This is equal to about 4 per cent of the total bitcoin in existence.

“Growing demand for bitcoin is a well understood phenomenon as it is incredibly recognised as a hedge against monetary and fiscal irresponsibility,” Crachilov concluded. “However, those investors who are patient owners of capital with long-term investment horizons will be best served either by direct bitcoin holding or via regular ETF vehicles.”