An increasing number of publicly traded companies have added Bitcoin (COIN:BTCUSD) to their balance sheets, but Standard Chartered is cautioning that volatility in the cryptocurrency’s price could soon trigger forced liquidations if market conditions worsen.
In a report released Tuesday, Geoff Kendrick, the bank’s lead digital assets analyst, points to a critical threshold: a 22% drop below the average purchase price could prompt corporate treasuries holding Bitcoin to sell off their assets.
Currently, 61 publicly listed firms classified as Bitcoin treasuries—companies that hold Bitcoin solely for balance sheet diversification rather than as part of their core business—collectively own about 673,897 BTC, representing roughly 3.2% of the total supply of Bitcoin ever to exist.
Kendrick notes that about half of these companies acquired their Bitcoin at an average cost exceeding $90,000 per coin.
“If Bitcoin prices fall 22% below average purchase prices, these companies may face forced selling,” he warned, citing the 2022 case of Core Scientific, which liquidated thousands of BTC after prices declined just 22% below its cash cost.
MicroStrategy (NASDAQ:MSTR), which led the way in corporate Bitcoin treasury adoption, holds the lion’s share—86% of the total BTC reserves—and boasts a lower average purchase price of around $70,000.
Newer entrants, however, are more vulnerable. Their holdings have doubled in the past two months to nearly 100,000 BTC, often purchased at higher prices than MicroStrategy’s, Kendrick points out.
The report also raises a structural concern over the longer term: while many Bitcoin treasuries currently trade at net asset value (NAV) multiples above 1 due to limited market access and institutional constraints, Standard Chartered anticipates that as ETFs and other vehicles improve access, NAV multiples above 1 may not be sustainable.
This shift could exert downward pressure on the stock prices of companies holding Bitcoin.
Although the bank remains optimistic on Bitcoin’s long-term prospects, it warns that near-term price swings may expose the fragility of these corporate treasuries. “A decline below USD 90,000 would put half of the Bitcoin treasury companies underwater,” Kendrick notes.
The crucial question, according to Kendrick, is how much financial strain these companies can tolerate before being compelled to sell their Bitcoin holdings.