Today's Corporate Bitcoin Holders Could be Tomorrow's Forced Sellers: StanChart
Corporate bitcoin BTC treasuries are adding to buying pressure at the moment, but a sharp drop in the price of the world's cryptocurrency could lead to forced liquidations, Standard Chartered analyst Geoff Kendrick said in a research report on Tuesday.
As many as 61 publicly listed companies have adopted the cryptocurrency as a treasury asset, and these firms now own a combined 673,897 bitcoin as of the end of May, or 3.2% of the cryptocurrency's total supply, the report said.
That big number, of course, owes nearly everything to Michael Saylor's Strategy (MSTR), which by itself holds a total of 580,955 tokens.
"Based on the 2022 example of Core Scientific (CORZ), we estimate that prices more than 22% below average purchase prices could lead to liquidations," wrote Geoff Kendrick, head of digital assets research at Standard Chartered.
In the bear market of that year, the bitcoin miner under considerable financial pressure sold 7,202 bitcoins in June 2022 at an average price of $23,000 to raise about $167 million..
"The forced sale price (forced in the sense that creditors would no longer fund Core Scientific's business model) was just 22% below the cost of production," said Kendrick.
If bitcoin were to move back below the $90,000 level, half of these bitcoin treasuries would be underwater, he added.
Read more: Bitcoin to See Additional $330B of Corporate Treasury Inflows by 2029: Bernstein