Coinbase's June report examines the risks associated with corporate long-term investments in Bitcoin and the economic context affecting the crypto market.
Corporate Bitcoin Holdings and Their Implications
Coinbase's research team has identified roughly 228 publicly traded companies holding over 820,000 BTC collectively. Notably, only 20 of these companies are employing a high-risk accumulation model similar to that of firms like Strategy (formerly MicroStrategy). These companies issue debt, often in the form of convertible notes, to raise capital primarily for cryptocurrency accumulation.
Risks of Forced and Discretionary Selling
Coinbase outlines two main risks connected to the increase of corporate Bitcoin holdings. The first is forced selling, where companies may have no option but to liquidate assets to service their debts. The second is discretionary selling, where firms might opt to sell portions of their holdings to finance operations or liquidity needs. 'Even a relatively small unexpected sale by one of these entities could destabilize investor confidence and lead to a broader liquidation event,' Coinbase notes.
Macroeconomic Stability and Its Impact on Crypto Markets
The report also highlights that the US economy has shown stronger-than-expected growth, reducing recession fears. However, rising long-term interest rates could tighten financial conditions for debt-heavy companies. There is a correlation between macroeconomic stress and crypto market volatility. If long-term rates rise too quickly, equity and credit markets might be adversely affected, impacting leveraged crypto firms.
Coinbase concludes that despite existing risks, the outlook for Bitcoin remains positive due to the diminishing dominance of the US dollar and increased global liquidity. However, altcoins may struggle to keep pace with Bitcoin due to lower institutional demand.
