tl;dr
Acquisition vehicles have increased Bitcoin demand recently, but their aggressive accumulation may harm its long-term institutional appeal, according to Swiss digital asset bank Sygnum. Strategy's goal of owning 5% of Bitcoin's supply risks undermining its safe-haven status and suitability as a rese...
Acquisition vehicles have significantly boosted Bitcoin demand in recent years, but their aggressive accumulation strategies may pose risks to Bitcoin's long-term institutional appeal. According to Swiss digital asset bank Sygnum, Strategy's ambition to own 5% of Bitcoin’s total supply threatens to undermine Bitcoin’s status as a safe haven and its suitability as a reserve asset for central banks.
Currently, Strategy owns nearly 3% of Bitcoin’s maximum supply, totaling approximately 582,000 BTC, and has realized profits exceeding 56%. While these gains have supported Bitcoin's price and market profile, Sygnum cautions that such concentrated holdings introduce substantial risks that could destabilize the asset’s reliability and overshadow more prudent treasury allocations preferred by most companies.
Strategy's approach involves leveraged convertible debt and leverages momentum in its stock price (MSTR) to accumulate more Bitcoin, creating a cycle of borrowing and bullish market sentiment. This high-beta model allows Strategy to raise capital when Bitcoin rallies, but it carries liquidity and market structure risks. Should Bitcoin experience a prolonged downturn that causes the stock to trade below conversion prices, Strategy may be forced to liquidate Bitcoin holdings to meet debt obligations, potentially shaking investor confidence and sending negative signals to the broader market.
Sygnum highlights that while the perpetual dividend mechanism partially mitigates risks linked to debt-funded Bitcoin purchases, decisions to sell Bitcoin to avoid share discounts could still trigger damaging market reactions. Ultimately, the bank recommends a more balanced approach featuring smaller, risk-adjusted treasury allocations rather than concentrating large holdings, a strategy they argue is better suited for most institutions seeking exposure to Bitcoin.