An analyst has expressed concerns that the primary threat to Bitcoin Treasury Companies (BTCTCs) is not price fluctuations but the manner in which their assets are financed.

Brian Brookshire, who leads Bitcoin initiatives at H100 Group, indicated that convertible bonds, while seemingly advantageous, represent a considerable and often overlooked danger to corporate Bitcoin strategies.

Corporate Expansion and Funding Strategies

In a recent tweet, Brookshire outlined the various financing options available to Bitcoin treasury firms and cautioned against the misuse of such instruments. Convertible bonds are central to his apprehensions, allowing companies to secure funds at favorable rates relative to current share prices, as evidenced by the “Smarter Convert” bond issued by The Smarter Web Company, which raised $21 million in Bitcoin-denominated notes.

“Convertible bonds can have quite favorable terms when issued under the right market conditions,” Brookshire noted, “but involve refinancing risks and can be accompanied by substantial short-selling, taking up to five years to unwind.”

This serves as a critical warning for those attempting to replicate successful treasury strategies: the very tools that may enhance Bitcoin holdings can constrain companies amid market downturns.

Paris-based Sequans became notable for liquidating part of its Bitcoin holdings, selling 970 BTC for $93 million, exemplifying this risk. Brookshire further advised that BTCTC management must thoroughly understand the implications of their financial decisions, adopting a long-term perspective when utilizing any particular financing instrument.

Finally, amid growing scrutiny regarding the leveraging of Bitcoin in corporate settings, a report from earlier this year projected a looming $12.8 billion debt maturity wall for BTC-focused firms, much of it linked to convertible notes due in 2027 and 2028.

Challenges of Rising Share Prices

Regulatory pressure has also emerged as corporate entities have become more entrenched in BTC acquisitions. Despite a decrease in the mNAV multiple for Strategy, which has declined from 1.52x to approximately 1.11x, Executive Chairman Michael Saylor stated that his corporation is equipped to endure a severe drop in Bitcoin prices.

On November 17, the company announced its largest acquisition since July, purchasing over $830 million in Bitcoin, countering rumors of asset liquidation. Concurrently, Tokyo-listed Metaplanet has expanded its holdings to 30,823 BTC and WiseLink recently disclosed plans for a three-year convertible note, adding yet another player to the burgeoning Bitcoin treasury landscape.

As market conditions evolve, BTCTCs will need to navigate these financial instruments with caution to safeguard their interests.