Strategy’s growing Bitcoin holdings, now nearly 3% of the total supply, may threaten the asset’s appeal as a reserve and safe-haven asset, warns Swiss digital asset bank Sygnum.
Acquisition vehicles like Strategy have significantly boosted Bitcoin demand, akin to the impact of ETFs. However, their aggressive purchase strategies risk concentrated ownership levels that could harm Bitcoin’s institutional credibility.
On Monday, Strategy added approximately 1,045 Bitcoin (around $110 million), bringing its total to 582,000 BTC. This represents nearly 3% of Bitcoin’s maximum supply and has generated an estimated 56% profit, according to Saylor Tracker.
Sygnum cautions that such concentration poses risks: “Large, concentrated holdings are a risk for any asset,” the report states. It also suggests that Strategy’s leveraged approach might obscure more prudent, risk-adjusted treasury allocations better suited for most companies.
Strategy’s model involves using convertible debt to buy Bitcoin while leveraging gains in its own stock price during bull markets. When Bitcoin rises, Strategy’s stock trades at a premium, enabling further capital raises to buy more Bitcoin and reinforcing a cycle of leverage and bullish momentum.
But this approach is vulnerable to downturns. If Bitcoin prices fall and Strategy’s stock trades below conversion prices on outstanding notes, the company may need to liquidate Bitcoin holdings to meet debt obligations. Although perpetual dividends may mitigate some risks, selling Bitcoin to avoid share discounts could signal market stress and trigger negative reactions.
Sygnum’s analysis highlights liquidity and market structure concerns that could reverse recent improvements in Bitcoin volatility, which have been vital for attracting institutional investors.