In recent months, institutional adoption of Bitcoin has been on the rise. However, companies like Franklin Templeton express concerns about the potential risks associated with this strategy.
Overview of Institutional Bitcoin Adoption
Institutional adoption of Bitcoin is increasing, with many companies considering Bitcoin accumulation as part of their treasury strategies. According to The Block, 135 public companies are accumulating only BTC. Some, like Strategy, Metaplanet, and Twenty One, are adopting Bitcoin as their strategy, while other companies such as SharpLink ETH and Upexi focus on Solana.
Issues and Risks of the Institutional Strategy
Franklin Templeton analysts warned that the future of institutional BTC and crypto treasury strategies is uncertain and depends on critical factors. In particular, if the market-NAV ratio falls below 1, new stock issuances could become dilutive, and companies may face difficulties in raising additional capital, which could hurt existing shareholders. Furthermore, if cryptocurrency prices decline, companies may be forced to sell their holdings to cover losses, leading to further declines in prices.
Expert Opinions
Analysts added that while institutional Bitcoin and crypto treasury models may see greater adoption, they could be risky investments during significant market downturns or prolonged bear markets. 'If Bitcoin and cryptocurrency prices fall, companies will sell their assets to protect their stock prices. This can undermine investor confidence and lead to a negative vicious cycle,' analysts noted.
Despite the growing interest in institutional Bitcoin adoption, the associated risks warrant careful consideration from investors and companies.
