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The number of companies that buy bitcoin to hold on their balance sheet has grown in recent weeks, helping the leading cryptocurrency hit its recent all-time high. But that newfound corporate support could soon become a downside risk to bitcoin’s price, according to Standard Chartered. While Strategy , formerly MicroStrategy, is the poster child for the bitcoin acquisition strategy by corporate treasuries, “imitators” have been gaining ground, Standard Chartered said in a report out Tuesday. Holdings by bitcoin treasuries have doubled over the past two months to just below 100,000 bitcoins, but their average purchase prices are far higher than Strategy’s in most cases, the note said. Reversal risk “Bitcoin treasuries are adding to bitcoin buying pressure for now, but we see a risk that this may reverse over time,” Standard Chartered analyst Geoff Kendrick wrote. “Most of the bitcoin corporate treasuries in our sample … have [net asset value] multiples above 1. For now, we think this is justified by market inefficiencies, including regulatory hurdles to investor access and conservative investment committee processes. But as these inefficiencies are eventually removed, we think bitcoin treasuries could become a source of downside price pressure and volatility.” Bitcoin’s notorious volatility could push its price below the average paid by many corporate treasury departments, Kendrick added. Half of them would be underwater if bitcoin fell below $90,000, he estimated. Should bitcoin drop more than 22% below companies’ average purchase prices, they could become forced sellers, he said. Pain threshold “The question then becomes, how much pain can companies withstand before being forced to sell their bitcoin?” Kendrick said, noting that Strategy’s treasury faced its greatest challenge in November 2022, around the time of the FTX-related crash. Bitcoin halved in value, to $15,500 from $31,000, but the company continued holding its bitcoin throughout. “Perhaps because the absolute [dollar] loss was small,” Kendrick suggested, “and also because U.S. spot [bitcoin] ETFs did not exist yet, so MSTR served a more important investment purpose than bitcoin treasuries do today.” In today’s altered crypto environment, “we do not think any of the newer entrants to the bitcoin treasury space could continue holding their bitcoin if bitcoin prices were to fall 50% below their average purchase price,” the analyst added. There are 110 publicly listed companies worldwide that own bitcoin, according to Bitcoin Treasuries. Standard Chartered monitors a sample of 61 that buy bitcoin purely to hold on their balance sheets but otherwise aren’t involved in the industry. This, for example, excludes bitcoin miners, crypto exchanges, asset managers, Bitcoin ATM providers, crypto services providers and Tesla. The subgroup that Standard Chartered tracks owned a combined 673,897 bitcoins as of the end of May, accounting for 3.2% of bitcoin’s maximum supply of 21 million. — CNBC’s Michael Bloom contributed reporting.
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