tl;dr
Standard Chartered warns that corporations buying Bitcoin at high prices risk significant losses and potential liquidation if prices fall. Currently, 61 public companies hold Bitcoin, controlling 3.2% of its total supply, with many purchasing above $90,000 per Bitcoin. A 22% price drop below average...
Standard Chartered has issued a warning to corporations that are purchasing Bitcoin at elevated prices, highlighting significant liquidation risks if prices decline. Research from the bank shows that 61 public companies currently hold Bitcoin, controlling approximately 3.2% of its total supply, with many having acquisition costs averaging above $90,000 per BTC. This high entry price exposes firms to substantial losses and reputational damage should the market experience corrections.
The report identifies a critical threshold: a 22% drop below the average purchase price could trigger liquidation risks, particularly for companies with weaker balance sheets or heightened leverage. This figure is based on historical market stresses, such as Core Scientific’s 2022 experience, which serves as a cautionary example.
Despite these risks, Bitcoin adoption in corporate treasuries continues to grow, mainly driven by bullish momentum and fear of missing out. Standard Chartered notes that many firms have net asset value (NAV) entry multiples above 1, signaling potential overexposure. The bank advises that while current market inefficiencies and regulatory conservatism may justify these valuations temporarily, this justification may diminish over time.
In summary, the firm stresses the importance of prudent risk management for companies holding Bitcoin, cautioning that without it, they are vulnerable to the extreme volatility that historically affected miners and crypto speculators. The ongoing surge in Bitcoin adoption among corporations reflects a strategic shift but comes with notable financial and reputational risks.