Institutional Bitcoin (BTC) adoption has been increasing rapidly in recent months, with many companies adopting either a Bitcoin treasury strategy or a warning from the US asset management giant.
According to The Block, Franklin Templeton, one of the leading asset management firms in the United States, warned about the risks associated with institutional Bitcoin treasury strategies.
Franklin Templeton analysts said the future of institutional BTC and crypto treasury strategies is uncertain and depends on several critical factors.
“Inspired by Michael Saylor's Strategy (formerly MicroStrategy) move into Bitcoin, this speculative approach is rapidly gaining momentum. And it's not just limited to Bitcoin.
While cryptocurrencies such as Bitcoin, Ethereum, Solana and XRP are the subject of corporate treasury strategy, 135 public companies accumulate only BTC.
Strategy, Metaplanet and Twenty One are adopting a BTC strategy, while SharpLink ETH, Upexi and Sol Strategies are implementing a SOL strategy. However, there are risks to this.”
At this point, Franklin Templeton analysts said that if the market-NAV ratio falls below 1, it brings with it a series of risks.
According to analysts, if this ratio falls below 1, new stock issuances become dilutive and companies may have difficulty raising additional capital without hurting existing shareholders, which could halt capital formation.
Worse still, if cryptocurrency prices fall, companies will be forced to sell their holdings to cover crypto losses and maintain stock prices, which will further drive down crypto prices, analysts said.
Analysts added that institutional Bitcoin and the crypto treasury model will see greater adoption, but these companies could become quite risky investments in the event of a significant decline or a prolonged bear market.
“If Bitcoin and cryptocurrency prices fall, companies will sell their assets to protect their stock prices. This can undermine the value of cryptocurrencies and investor confidence, leading to a negative vicious cycle.”
*This is not investment advice.
