Bitcoin Treasury Strategy Faces Skepticism From Analysts

James Check, the lead analyst at Glassnode, has expressed skepticism about the long-term viability of the Bitcoin treasury strategy. In a recent post on X, Check asserted that the strategy may have a much shorter lifespan than many expect, suggesting that the easy gains for new companies entering the space might already be behind them. Check's analysis indicates that the current market dynamics may not support the sustained growth of Bitcoin as a treasury asset, particularly for newer entrants.

Check emphasized that the sustainability of a company’s product and strategy is crucial for long-term Bitcoin accumulation. He noted that investors are increasingly favoring early adopters, making it challenging for newer Bitcoin treasury firms to gain traction. "Nobody wants the 50th Treasury company," Check stated, highlighting the competitive nature of the market. He also warned that newer firms may struggle to sustain a premium and get off the ground without a serious niche, indicating that the market is entering a "show me" phase where companies need to demonstrate clear value propositions.

Check's views are supported by recent data showing that at least 21 entities added Bitcoin as a reserve asset in the 30-day period leading up to his post. The largest public Bitcoin treasury, Strategy, holds 597,325 BTC, while the second-largest, MARA Holdings, holds 50,000 BTC. This disparity underscores the dominance of early adopters and the challenges faced by newer entrants. Check also noted that startup Bitcoin treasury firms attract retail speculators but cautioned that these speculators do not have infinite resources.

Check acknowledged the difficulty in predicting the exact timeline for the downturn of newer firms, given his bullish outlook on Bitcoin's price. He explained that the sustainability of the Bitcoin treasury strategy varies across the spectrum, with early adopters having more runway than newer entrants. Check agreed with Udi Wizardheimer, co-founder of Taproot Wizards, who suggested that some companies are using the Bitcoin treasury strategy to make quick profits without fully understanding its long-term purpose. Wizardheimer warned that "the weak ones" might be acquired at a discount by stronger players, indicating potential consolidation in the market.

Recent doubts have emerged over firms adopting a Bitcoin treasury strategy. Venture capital firm Breed argued in a report that only a few Bitcoin treasury companies will stand the test of time and avoid the "death spiral" that could impact BTC holding companies trading close to net asset value. Additionally, concerns have been raised about "copycat" firms trying to create Bitcoin banks without proper safeguards or risk management, which could potentially harm Bitcoin's image if these smaller firms fail.

Check's analysis underscores the need for a more nuanced understanding of Bitcoin's role in the financial landscape. As the market evolves, investors and financial institutions must stay informed about changing conditions and adjust their strategies accordingly. The sustainability of the Bitcoin treasury strategy will depend on the ability of companies to demonstrate long-term value and adapt to the competitive dynamics of the market.