More and more listed companies include Bitcoin (BTC) in their balance, inspired by the example of Michael Saylor. But according to a new report from the British Bank Standard Chartered, a hefty risk is accompanied by this. If the Bitcoin price drops, a situation is threatening at many companies in which their shares are worth less than their BTC ownership. This can have serious consequences for shareholders.
From strategy to system risk
It started in 2020, when Michael Saylor transformed his company Strategy (formerly micro strategy) into a Bitcoin pioneer. Instead of putting his 500 million dollars in bonds in bonds, he bought 250 million dollars from BTC. That decision paid out: the share of MSTR rose by almost 2,900 percent.
The enormous price rise of MSTR started a wave of imitation. In the meantime, more than a hundred listed companies have put Bitcoin on their balance, in the hope of comparable profits. But according to Standard Chartered, many of these companies underestimate the risk.
The bank states that their strategy mainly works as long as the Bitcoin Koers stays high. BTC drops below $ 90,000, then in more than half of 61 companies investigated the market value of their bitcoin would be greater than their market value. In such a scenario, investors can lose confidence, with panic sales and possibly even bankruptcies as a result.
The example of Core Scientific
As a warning, the bank points to the American mining company Core Scientific. That chose to hold its entire Bitcoin stock, financed with loans. When the rate fell sharply in June 2022, it was forced to sell $ 7,202 at an average of $ 23,000, while the production costs were at $ 29,600. The loss ultimately led to bankruptcy.
According to Standard Chartered, a similar scenario for companies without strong liquidity buffers threatens. A price fall of only 22 percent can then be sufficient to lead to forced sales, especially at companies with high debts.
Warning for investors and drivers
Although keeping BTC on the balance can yield considerable profits in bull markets, according to the bank it remains an extremely volatile strategy. Certainly now that the Bitcoin rate is close to its historic peak, the investors can give a false sense of safety.
Standard Chartered emphasizes that companies are not allowed to stare blindly at the success of Strategy or other early loafers. Without thorough risk management and sufficient reserves, the dream of bitcoin ownership can quickly turn into a nightmare.
Source: https://newsbit.nl/standard-chartered-luidt-noodklok-bitcoin-op-de-balans-is-riskant-spel/
