Bitcoin News Today: Bitcoin Treasury Firms Face Survival Test in Bear Market

Bitcoin treasury companies face significant challenges in a potential bear market, according to Dylan LeClair, a Bitcoin strategist at Tokyo-listed MetaPlanet. In an episode of What Bitcoin Did, hosted by Danny Knowles, LeClair warned that while corporate adoption of Bitcoin is on an irreversible trajectory, not all firms will survive the volatility. The survival of these companies, he argued, depends on financial engineering, scale, and the ability to withstand prolonged drawdowns without panic selling [1].

LeClair emphasized that Bitcoin treasury companies operate under a "winner-take-most dynamic," driven by liquidity, index inclusion, and balance-sheet size. For instance, Strategy, formerly MicroStrategy, trades at a 1.8x premium, but the company’s sheer size gives it a $50 billion premium advantage over smaller players. Maintaining a high premium, he explained, becomes increasingly difficult as the price of Bitcoin rises or as companies accumulate more of the asset [1].

When asked about the impact of a bear market, LeClair rejected the idea of a 70% drawdown as a guaranteed base case. Instead, he noted that the market tends to reprice and consolidate over time. However, he was clear that a risk-off period would expose weak balance sheets. Firms with leveraged positions, short-term debt, or unsecured liabilities would face significant pressure. Permanent preferred equity, which offers dividends without maturity dates, stands out as a more stable financing structure in his view [1].

MetaPlanet, for which LeClair is responsible, emphasizes conservative risk management. The firm maintains a "BTC rating" of 16.5x, meaning it holds $16 in Bitcoin for every $1 in debt. This, he said, is not under-optimization but a deliberate strategy to ensure flexibility during a downturn. However, he acknowledged the behavioral challenge: can management resist panic selling during a severe bear market? “It’s naive to think every Bitcoin company will be a success,” he said, predicting that some will fail and that bankruptcies are inevitable [1].

LeClair also highlighted the importance of transitioning from equity capital to the fixed-income markets. While convertible bonds initially provided leverage, they come with the risk of volatility dampening due to hedge activities by underwriters. A more durable solution, he said, is permanent capital through preferred equity. He credited Strategy’s innovative use of preferred stock, such as its new variable-rate preferred "Stretch" (ticker: STRC), for achieving "escape velocity" in the market [1].

STRC is designed to trade near $100 by adjusting dividends and issuing new shares if necessary. This approach, LeClair noted, creates a cash-equivalent instrument for investors without imposing maturity cliffs on the issuer. Unlike algorithmic stablecoins, which are vulnerable to redemption spirals, Strategy’s preferreds are senior to common equity and heavily overcollateralized with transparent Bitcoin holdings [1].

In a downturn, LeClair expects consolidation within the sector. Preferred equity can serve both offensive and defensive purposes, adding dry powder for Bitcoin purchases or common buybacks. They also reduce reliance on convertible bonds and the volatility-neutralizing effects of gamma trading. MetaPlanet, he noted, is focused on Bitcoin itself and is not aiming to become a consolidator [1].

LeClair was cautious about the emergence of new Bitcoin treasury companies. While bringing large private Bitcoin pools public is "overwhelmingly positive" for the asset, he believed that Strategy’s lead—approximately 629,000 BTC—was "pretty insurmountable." He speculated that only a major player like Facebook’s Mark Zuckerberg could realistically challenge the company’s position, but he deemed such a move unlikely given current priorities like AI development [1].

Ultimately, LeClair sees Bitcoin corporate adoption as still in the early innings. The broader financial system remains largely indifferent, but the emergence of Bitcoin-backed instruments could change this. Treasury companies that navigate the credit markets successfully, he argued, will not only survive a bear market but also use it to widen their lead [1].

Source: [1] [Weak Bitcoin Treasury Companies Will Be Crushed By Bear Market, Insider Warns](https://www.newsbtc.com/bitcoin-news/weak-bitcoin-treasury-companies-bear-market/)