Key Takeaways
- Strategy now holds nearly 3% of all bitcoin, raising centralization concerns.
- Sygnum warns leveraged corporate accumulation distorts liquidity and could deter central banks from holding bitcoin as a reserve asset.
- Market downturns may force large holders to sell, amplifying volatility and undermining institutional adoption.
Regulated digital asset bank Sygnum has cautioned that bitcoin acquisition vehicles like Strategy (formerly MicroStrategy) are amassing outsized BTC holdings, potentially making bitcoin unsuitable as a reserve asset for central banks.
Strategy announced on Monday the purchase of an additional 1,045 BTC for $110.2 million, bringing its total to 582,000 BTC—equivalent to roughly 2.8% of bitcoin’s total supply and valued at over $63 billion.
Sygnum analysts noted:
“Large concentrated holdings are a risk for any asset and at this point Strategy’s holdings are approaching a point where they become problematic, with the company holding close to 3% of the total bitcoin ever issued, but a much higher share of the actual liquid supply”.
“A private corporation controlling a large portion of the existing supply would make bitcoin inappropriate for central banks to hold as a reserve asset.”
Shift from treasury strategy to speculative vehicles
Sygnum highlighted the transformation of corporate bitcoin accumulation from a treasury hedge into a speculative vehicle, with firms like Strategy, Twenty One Capital, and Nakamoto Holdings leveraging debt to acquire bitcoin at scales beyond their business operations.
The bank warned that this model reduces the liquid supply, distorts market volatility and liquidity, and crowds out smaller, more measured corporate allocators.
Market risks and sustainability
While Michael Saylor asserts that Strategy’s capital structure could withstand a 90% bitcoin price drop for up to five years, Sygnum cautions that bear markets or fundraising challenges might force leveraged firms to sell, amplifying downturns. The trend also risks deterring central banks and institutions seeking prudent bitcoin allocations.
“These vehicles have catalyzed demand for bitcoin… However, as demand levels off and is saturated by increased supply, the valuation of these shares relative to their bitcoin holdings is at risk. Additionally, these strategies also create certain risks for the crypto market as a whole.”
