TBW - Bitcoin's Institutional Investors: Assessing Market Impact of a Potential Reversal
Bitcoin is increasingly attracting institutions looking for an alternative form of collateral and an asset deemed particularly resilient. In recent months, several US states, including New Hampshire, Arizona and Texas, have passed legislation to incorporate Bitcoin into their reserves, signalling a shift in adoption beyond the circle of individuals and large corporations to the public sphere.
Alongside this, recent reports indicate that Fannie Mae and Freddie Mac are exploring the possibility of using cryptocurrencies for real estate financing, via assets held on regulated platforms in the US.
This development could pave the way for a new phase of institutional adoption, particularly among listed real estate trusts (REITs) and other industry players, by making it easier to incorporate digital assets into mortgage lending without first converting to dollars.
Another signal of growing institutional interest is the rise in so-called "whale" wallets, those addresses holding more than 1,000 bitcoins. In addition to the 1.3 million or so bitcoins accumulated by ETFs and the additional million held by corporate treasuries around the world, on-chain activity confirms the rise of large investors.
Bitcoin holdings have risen sharply in these portfolios of large holders, which include many institutional entities. The launch of ETFs triggered an adoption movement that has sustained the market's rise since the summer of 2024.
In recent months, these large portfolios have stepped up their purchases, taking in over 450,000 more bitcoins than a year earlier. Conversely, smaller wallets (holding less than 1,000 or less than 100 bitcoins) have reduced their exposure, selling more than 65,000 bitcoins over the same period.
>> Exclusive study - Institutional buying could push the price of Bitcoin to $180,000 by 2026
The source of funding for Bitcoin Treasury Companies
In recent years, an increasing number of listed companies have been putting Bitcoin into their treasuries. And the trend is accelerating. In the last 30 days alone, the number of institutional players with exposure to Bitcoin has jumped by 28%. At the same time, their share of the total supply of bitcoins has risen by 3.43%.
Behind this dynamic, there are above all a handful of companies that will be very active in 2025. Apart from groups specialising in mining - with the notable exception of Marathon (MARA), which combines mining and investment - the most offensive companies this year are Strategy, XXI, Metaplanet, ProCap BTC.
How do these companies buy so many bitcoins? In most cases, they issue shares to raise funds. In other words, they sell new shares in the company to investors in exchange for cash, which they then use to buy BTC. This is what Strategy has done, raising nearly $2.7 billion through three types of shares: STRF, STRK and STRD.
This method allows them to avoid going into debt, but it dilutes existing shareholders. Put simply, those who already own shares see their share of the pie diminish... even if the value of bitcoin offsets this effect.
In contrast, Marathon has chosen another route: debt financing. The company is borrowing heavily to develop its mining activities while building up its bitcoin reserves. As a result, its debt-to-equity ratio is 56%, meaning that more than half of its bitcoins are bought on credit. This is well above the average of the other companies mentioned, which is around 16%.
This strategy may pay off if bitcoin rises. But it exposes Marathon to greater risks, particularly in the event of a prolonged market downturn.
Other structures, such as XXI or ProCap BTC, have gone through mergers with "shell" companies (SPACs) to go public. In these cases, no or little debt. These entities either injected bitcoins they already held or raised funds from investors to buy BTC once the merger was finalised.
Since 2020, excluding Marathon, more than $47 billion has been invested in bitcoin by companies such as MSTR, XXI, Metaplanet and ProCap. Of this impressive figure, 93% is based on equity, i.e. money raised without taking on debt, and only 7% on credit. For the time being, this configuration reflects a degree of prudence without any obvious excess of leverage at this stage.
>> Study: Bitcoin facing the global currency spiral
The risks presented by Strategy
Strategy's bitcoin accumulation strategy is not slowing down. Quite the contrary, in fact. The company has announced its intention to raise $42 billion between now and 2027 to finance its purchases. Half of this sum ($21 billion) will come from the issue of preference shares, and the other half from new convertible bonds.
The forthcoming preference shares (notably STRKs) offer a guaranteed annual dividend of between 8% and 10%, making them very attractive products for yield-seeking investors. On the other hand, they do not give access to early redemption and can only be converted into ordinary shares at a ratio of 10 STRK shares for 1 MSTR share, provided that the latter exceeds a certain valuation threshold ($1,000 per share).
Michael Saylor, Strategy's emblematic boss, intends to double the stake by combining share sales and debt via convertible bonds offering the same distribution conditions. The aim? To bolster bitcoin reserves, which already represent around 3% of the total existing supply, once lost BTC and those that will never circulate again are taken into account.
>> Bitcoin Treasury Companies : An overview of the financial levers at their disposal
1st major risk: a prolonged fall in the BTC price
This aggressive policy does, however, raise questions. While Strategy is benefiting from a favourable climate at the moment (with bitcoin on the rise and strong demand from the financial markets), the scenario could quickly turn on its head in the event of a downturn.
If the value of bitcoin falls or market confidence erodes, the company could see the net value of its assets melt away, to the point where it would have to sell some of its bitcoins to remain solvent. This type of forced sale could exert significant pressure on the market, increasing volatility.
For the moment, the risk of bankruptcy seems limited. But the more debt and financial commitments increase, the less room for manoeuvre there is. This financial leverage works as long as the bitcoin price is rising. In the event of a prolonged down cycle, the mechanism could backfire on Strategy... and on the market as a whole.
2nd major risk: liquidity
Strategy's financial situation raises some real questions. The company's historic business, centred on software, remains structurally loss-making. For the past year, losses have been accumulating quarter after quarter, peaking at -41 million dollars in the third quarter of 2024. Clearly, Strategy is not generating enough revenue to fund its operations.
This weakness is reflected in the main liquidity indicators. The Current Ratio, which measures the ability to repay short-term debt with available assets, remains below 80%. As for the Quick Ratio, which is even stricter because it excludes less easily monetised assets such as equities, it has fallen below 20%.
These levels are well below the critical threshold of 100%, and show that the company does not have sufficient resources to honour its most urgent commitments. To cope, Strategy is forced to refinance regularly, often to repay debts that have fallen due.
In this tense environment, the company is continuing to increase its financial expenses. It plans to raise 21 billion dollars via new issues of preference shares, in particular the STRK series.
These securities promise a fixed dividend of 8%, which makes them expensive products over the long term. The total value of STRKs already issued is $1.2 billion, generating an annual commitment of $96 million. Adding the distributions linked to the STRF and STRD series, annual payments now exceed $315 million. This is five times more than the cash available today.
To meet these obligations, Strategy has little room for manoeuvre. The company will either have to manage to raise even more capital on the markets, generate revenue by lending out some of its bitcoins, or resort to selling off a fraction of its digital assets.
Each of these options carries its risks. But they all reveal the same thing: behind the image of a fast-growing company, Strategy remains at the mercy of an increasingly difficult liquidity equation.
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3rd major risk: convertible bond arbitrage by hedge funds
The giant Strategy has raised $5 billion by issuing interest-free (0%) convertible bonds maturing in 2028. Funds such as Millennium Management and Calamos Advisors rushed in. But not because they believe in Strategy's solidity or because they want to earn interest. Their objective is quite different: to take advantage of a strategy that is well known in the hedge fund world, called convertible bond arbitrage.
A convertible bond is a bit like a traditional bond... with an option grafted on. It can be converted into shares if the price exceeds a certain threshold. In Strategy's case, the thresholds are very high: $433 for the first bond, $672 for the second. For the time being, therefore, these options are "offside", but that doesn't stop funds from taking advantage of them.
The mechanism is as follows: the bond increases in value if the share price rises and approaches the conversion threshold. Conversely, if the share price falls, the bond retains some of its value thanks to its debt status. In other words: on the upside, there is leverage. On the downside, there is protection. It is this asymmetry that funds are looking for.
Contrary to what you might think, these investors do not necessarily want to convert their bonds into shares. They prefer to remain creditors, as this guarantees them priority repayment in the event of a problem. In the meantime, they are betting on market movements, both upwards and downwards.
Let's take a fund that buys $1 billion of these bonds. If the sensitivity (the famous delta) of the option is 0.4, it will sell $400 million worth of MSTR shares at the same time. This is what is known as a "neutral" position, which seeks to profit solely from volatility, without betting on the direction of the price.
And since volatility is precisely very high on MSTR - more than 140% over one month, more than double that of bitcoin - the gamble is more than worth it. On both the upside and the downside, it is possible to make money by regularly readjusting your position.
The recipe for profit is simple enough to summarise:
= bond-related gains + income from securities lending - losses on the short position - cost of borrowing.
And conversely, on a downside:
= gains on the short position - moderate loss on the bond + lending income - cost of borrowing.
As long as volatility remains high, this strategy is almost a cash machine for hedge funds. But if the stock became calmer or harder to borrow against, the whole model would be called into question. And for Strategy, that would not be good news.
If volatility falls, investor appetite for its bonds will also fall. It will then have to offer more generous coupons, which will increase its financial charges. A very real risk, given that the company's business model is largely based on leverage and exposure to bitcoin.
This risk is limited in the short to medium term. As Andre Dragosch, Head of Research at Bitwise, points out: "Although MSTR continues to post low levels of liquidity, the risk of insolvency and bankruptcy remains moderate and no mass liquidation of bitcoin reserves is imminent. A major change would be the use of bitcoin lending or other recurring revenue-generating strategies, such as option writing."
Marathon and Semler: these companies that don't benefit from a valuation premium
Not all companies that hold bitcoin in cash are in the same boat. Some, such as Strategy, Metaplanet and The Blockchain Group, are valued at more than the net value of their bitcoin reserves (mNAV), reflecting investor confidence in their business model. But others, despite significant exposure to the digital asset, are trading at a discount.
This is particularly the case with Marathon and Semler Scientific, which are seeing their stock market valuations slip to the level of (or sometimes even below) the value of their bitcoins.
Marathon Digital, the leading player in bitcoin mining in terms of volume and computing power, is now facing a sceptical market. Its shares are trading with an mNAV of 0.984, meaning that the company is valued at less than its bitcoins alone.
There are several reasons for this discount. First, an unclear strategy. Marathon tried to integrate a "bitcoin cash" dimension into its main mining business, but without convincing. The stock lost more than half its value in the summer of 2024, and the 2025 financial year got off to a poor start, with a $500 million loss in the first quarter. Its cash flow per share has slipped into negative territory, to -1.02 dollars.
Debt is also a cause for concern. In one year, the debt-to-assets ratio has risen from 36% to 41%, and if we compare debt to the value of its bitcoins, we even reach 49%. At the same time, the company has tripled the number of new shares issued, from $600 million to $1.8 billion, diluting the stake of existing shareholders.
Finally, its mining business remains extremely exposed to variations in the bitcoin price, energy costs, machine performance and access to competitive electricity. This instability compromises Marathon's ability to generate enough cash to meet its debts, fuelling the risk of insolvency.
The market remains cautious in the face of this configuration. For many investors, buying Marathon shares is like gaining exposure to bitcoin without the benefits. The discount on the share price, coupled with the volatility of the bitcoin used as collateral, complicates fundraising and limits room for manoeuvre. Unless there is a clear turnaround, Marathon could be forced to sell off some of its assets to reduce its debt, a decision that would weigh on its long-term strategy.
The case of Semler Scientific is a little different. Long buoyed by a valuation premium thanks to its bitcoin accumulation strategy, the company has returned to a more modest level. Its mNAV, which had reached 1.82 in the summer of 2024 and peaked at almost 2.9 in January 2025, has now returned to equilibrium. Meanwhile, its capitalisation rose from $170m to $620m, before falling back.
Semler retains a core healthcare business, with a business model long considered solid. From 2020 to 2023, the company posted steady revenue and cash flow growth. But in 2024, sales contracted, heralding a loss of momentum. The first quarter of 2025 confirmed this trend, with earnings per share falling sharply from $5.13 at the end of 2024 to $3.78. Stock market performance has deteriorated, and the valuation has aligned with the value of its bitcoins alone.
Another worrying sign is the level of debt. Long close to zero, the debt-to-assets ratio soared to 33% after Semler borrowed $100m to fund bitcoin purchases.
The company has also issued new shares, which is weighing on shareholder returns. Despite this, Semler still has a viable operating base, which sets it apart from Marathon. But its ability to attract new investors remains uncertain.
These two cases illustrate the limits of "bitcoin cash" positioning without a clear strategy or solid financial equilibrium. The absence of a valuation premium, unlike Strategy, limits their ability to finance themselves and increases their exposure in the event of a market downturn.
The rise in the average cost of acquiring bitcoins reinforces this fragility. And without a loyal community to support valuation, as is the case at Strategy, volatility remains enemy number one.
>> Bitcoin Mining: A profitable but only-for-the-powerful industry
What happens if inflows into bitcoin ETFs stop?
The question of the security of bitcoins held on behalf of ETFs regularly comes up in public debate. In recent months, some analysts have expressed their concerns, but in reality, this risk today remains controlled and relatively well under control.
The custodians chosen by ETF issuers, such as Coinbase Custody, rely on strict cold storage systems, with additional layers of security. All outgoing transactions require the signature of an independent third-party administrator, who is responsible for supervising movements. At the same time, most of these players are covered by insurance to protect their assets against piracy. The SEC also regulates the use of bitcoins: when an ETF states in its prospectus that it will not lend its assets, this rule is binding. Breaching this commitment could expose the manager to sanctions or even prosecution.
But the real risk is not so much piracy as a much more traditional phenomenon: volatility of flows. Since their launch, bitcoin ETFs have massively attracted retail investors. Today, around 75% of shares are held by non-professional investors, compared with just 25% by institutional investors. This imbalance makes these products highly sensitive to the mood of the market.
In bear markets, these retail investors are the first to panic. The result: mass withdrawals, forced sales, and increased pressure on prices. As Andre Dragosch, Head of Research at Bitwise, sums up: "During a bear market, I expect flows into bitcoin ETPs to become negative, as they are highly pro-cyclical. The reason: the investor base remains predominantly retail, as evidenced by 13F filings in the US. The institutional share is growing, but remains around 25%."
Concretely, when an investor resells his ETF units, the corresponding bitcoins are transferred from the custodian to a regulated centralised platform, then resold on the market. These movements are traceable on the blockchain. With each wave of withdrawals, the volume of bitcoins sent to exchanges increases. And historically, this dynamic puts pressure on the price. When net inflows to the platforms rise, the price of bitcoin tends to fall.
We saw this very clearly during the February 2025 pullback. After an all-time high driven by the election of Donald Trump and strong ETF-related accumulation, the trend reversed. In just a few weeks, withdrawals totalled $4 billion, with an average of between 1,000 and 1,200 bitcoins transferred to exchanges every day. The price then fell from $106,000 to $84,000, before dropping to $78,000 in March. Conversely, periods of accumulation, visible on deposit addresses, coincided with the market's strongest rises.
In other words, the health of bitcoin ETFs depends as much on their technical security as on the stability of their flows. And for the time being, as long as retail investors remain the main holders, volatility will remain their Achilles heel.
What would happen if corporate treasuries sold their bitcoins?
Among the many indicators that market analysts monitor, the ratio between bitcoins present on exchange platforms and stablecoin reserves has become a signal to be taken seriously. This indicator captures investors' intentions to sell. The higher the ratio, the more bitcoins are sent to the platforms, generally to be sold. This behaviour mechanically fuels downward pressure on prices.
In February this year, during a 17% decline in the market, this indicator came into its own. Statistical modelling revealed that for every 1% increase in the stablecoin balance, the price of bitcoin fell by an average of 0.18%. This figure, known as the beta, illustrates the sensitivity of the market to these flows. Even if it is not a perfect correlation, it gives a concrete idea of the effect that certain behaviours of large holders can have on prices.
It is in this context that the question of corporate treasuries arises, which today collectively hold almost 850,000 bitcoins, or around 5% of the total supply created since inception. In the event of a shock (bankruptcy and the need to repay debt or a simple deleveraging strategy), the sale of even part of these reserves could have a very significant effect on the market.
At the time of analysis, bitcoin was trading at around $109,000 and average inflows to centralised platforms were around 19,000 bitcoins. Applying the beta of -0.18%, we can estimate that a sale of just 190 bitcoins would result in a price fall of around 0.18%. On this basis, several stress scenarios were simulated: if treasuries were to sell 1%, 3% or 5% of their reserves, this would represent volumes of between 8,500 and 42,500 bitcoins. For Strategy alone, these amounts would vary between 6,000 and almost 30,000 bitcoins.
Transposing these figures to the model, the results speak for themselves. A liquidation of just 1% of company reserves would result in a potential drop of 8%, or around $8,800 less on the bitcoin price. In the case of a larger sale of up to 5%, the correction could reach more than 40%, or a collapse of $44,000.
For Strategy alone, the impacts would be proportionately smaller but still significant, with an estimated drop of 28% in the most extreme scenario.
This type of modelling is not, of course, an exact science. But it does highlight several key points. Firstly, companies holding bitcoins now represent a significant force on the market. Their weight is set to grow if the accumulation trend continues. Secondly, the scarcity of bitcoin is increasing with time. Many coins are inactive or even lost, and those actually available for sale are steadily declining.
Finally, this scarcity translates into lower liquidity on exchange platforms: there are fewer buyers available at each price level. In the event of a sudden sale of a large block, order books can empty quickly, amplifying the fall in price.
To sum up: bitcoin treasuries, while absent from the major conversations about regulation or innovation, have today become a systemic risk factor. Not because of their technology or governance, but simply because they hold a growing share of an increasingly scarce asset.
The Big Whale's opinion
It is difficult today to measure precisely the real impact that so-called "bitcoin treasury" companies could have on the asset price. But one thing is clear: most of these companies do not have a profitable business model. They do not generate recurring cash flow and live essentially off debt or the creation of new shares. The higher their debt, the higher their risk. And if the markets turn, these companies could find themselves forced to sell part of their bitcoins to repay their debts, as they have no other way of covering them. This type of scenario would pave the way for brutal liquidations.
The case of Strategy is emblematic. As long as volatility remains high, leverage attracts speculators and some investors prefer to buy MSTR shares rather than bitcoin directly, the company can continue to accumulate reserves and increase the amount of BTC per share. But this dynamic is based on a fragile balance. If the 'gamma game' breaks down (i.e. if price movements stop fuelling this virtuous circle), the situation could tip very quickly. Valuations could plummet, and with them the ability to raise new funds.
These companies therefore represent a risk for the market. A diffuse risk, which does not call into question the fundamentals of the Bitcoin protocol, but which can cause major jolts in prices. In the event of a forced sale, the shock would be absorbed by the market in the short to medium term. As always with Bitcoin, episodes of correction are followed by phases of recovery. The pressure would be one-off, but not structural.
However, it would be a mistake to dismiss the contribution of institutions. Their arrival in the ecosystem is a necessary step if the market is to reach sufficient maturity, gain in depth, and continue to legitimise itself. As Andre Dragosch, head of research at Bitwise, explains: "The institutional adoption of Bitcoin is ultimately inevitable. There are growing economic incentives to do so: rising public debt, currency devaluation and, ultimately, inflation, which is eroding corporate cash holdings in fiat currencies such as the dollar or the euro. Converting some of this cash into Bitcoin is undoubtedly more advantageous for shareholders, as shown by the stock market valuations of listed companies holding BTC. The path to mass adoption and hyperbitcoinisation is likely to be through institutions."
