Bitcoin reserve strategy companies are heating up: how large-scale buying pushes up coin prices and becomes a ticking time bomb in the market?

In the past six months, the price of Bitcoin has remained high, largely driven by new types of companies focused on acquiring Bitcoin through leverage, known as "Bitcoin acquisition companies." However, while they boost market sentiment and drive up prices, concerns are gradually emerging: "If certain companies control a large amount of Bitcoin, will it impact liquidity and fluctuation, and could it potentially cause Bitcoin to lose its potential as a 'central bank reserve asset'?"

From Financial Strategies to Leveraged Funds: The Bitcoin Investment Wave Triggered by MicroStrategy

Several "Bitcoin Acquisition Companies (Bitcoin Acquisition Vehicles)" have recently focused on buying Bitcoin and making it the core of their asset allocation through leveraged operations and financial innovations. Since MicroStrategy (, now Strategy), heavily invested its corporate assets in Bitcoin in 2020, this strategy has attracted many enterprises to follow suit, including Tesla, Twenty One Capital, GameStop, and even Trump Media.

(Strategy leads the trend, a detailed article on Bitcoin reserve strategy company investment guide)

Initially, they were motivated by the consideration of hedging against the inflation of fiat currency, but as the price of Bitcoin rose, these companies began to issue financial instruments such as convertible bonds or preferred stocks to leverage and expand their Bitcoin holdings, transforming into an existence similar to a "closed-end fund."

As of now, Strategy holds over 580,000 Bitcoins, with a market value of nearly 63 billion USD, accounting for nearly 2.8% of the total supply. If we calculate the actual circulation volume, its proportion is even higher.

The Top Five Bitcoin Reserve Strategy Companies: Leverage and Premium: The Financial Magic of Bitcoin Combined with Equity and Convertible Bonds

Bitcoin reserve strategy companies raise funds through equity or convertible bonds to purchase Bitcoin. If their stock price exceeds the actual asset value, investors will pay a "premium" to acquire the stock, and this premium can in turn be used to increase Bitcoin holdings, further boosting the per-share value, creating a positive feedback loop.

Swiss licensed crypto bank Sygnum is concerned that this model may not be able to cycle infinitely:

When market demand is saturated, sentiment turns sour, or the price of Bitcoin falls, stocks will turn to "discount trading," old investors will suffer, and new capital will find it difficult to enter.

In addition, when the price of Bitcoin fluctuates sharply downwards, these companies may be forced to sell Bitcoin to repay debts, exacerbating market downturn pressure and severely impacting market confidence.

( MicroStrategy Strategy Liquidation Concerns Resurface: How Will the Bitcoin Price Plummet Affect This Company? )

Sygnum: Strategic coin hoarding may drive Bitcoin further away from Central Bank reserves.

Sygnum warns that the large-scale Bitcoin hoarding behavior of Strategy and its imitators is undermining the feasibility of Bitcoin becoming a Central Bank reserve asset:

The decentralization and high liquidity of Bitcoin are the foundation of its status as "digital gold"; however, when a single entity controls too many tokens, it undermines its neutrality and acceptability as a safe asset.

The liquidity and volatility of Bitcoin are key considerations for many institutions and central banks; however, these "leverage buyers" are distorting these structures, which may deter more conservative funds.

Market Contribution and Systemic Risk: The Double-Edged Sword of Bitcoin Reserve Frenzy

It is undeniable that Bitcoin acquisition companies have played a significant role in driving market prices and expanding investment exposure, filling the gap left by ETFs or other regulated investment products. However, as more and more companies enter this track, investors also need to be aware of the valuation cap and systemic risks. Sygnum also reminds:

Packaging these companies as "corporate financial strategies" is misleading, as their nature is closer to "high-risk investment funds."

After all, while strategic buying is certainly exciting, these companies will become potential "sell pressure detonators" when prices fall, financing becomes difficult, or the regulatory environment changes.

(CZ Talks about Bitcoin reserve companies: Not taking risks is the biggest risk!)

This article Bitcoin Reserve Strategy Company is Hot: How Does Large-Scale Buying Push Up the Price of Coins and Become a Market Unexploded? It first appeared in Chain News ABMedia.