The Growing Risks of Bitcoin Treasury Companies in a Volatile Market

The Bitcoin treasury model, once hailed as a revolutionary approach to corporate finance, is increasingly revealing structural vulnerabilities that threaten to destabilize both individual firms and broader markets. What began as a bold experiment-leveraging corporate balance sheets to accumulate Bitcoin as a strategic reserve asset-has evolved into a precarious ecosystem rife with forced selling dynamics, liquidity constraints, and systemic risks. As macroeconomic pressures intensify and market sentiment shifts, the fragility of this model is becoming impossible to ignore.

The Leveraged Model and Asset-Liability Mismatch

At the core of the Bitcoin treasury strategy lies a fundamental imbalance: companies are using income-generating liabilities (such as convertible bonds and preferred shares) to fund non-income-producing assets (Bitcoin). This mismatch creates a structural vulnerability, as firms must service debt with cash flows while their primary asset-Bitcoin-generates no yield. According to a report by , over 100 publicly traded companies adopted this model between 2023 and 2025, borrowing billions to purchase digital assets. However, as Bitcoin prices fluctuated and stock markets declined, many firms found themselves in a bind. By late 2025, median stock prices for these companies had dropped 43% year-to-date, far outpacing Bitcoin's 7% decline and the S&P 500's 6% gain.

The risks are amplified for firms that diversified into altcoins. For example, Alt5 Sigma, which allocated a significant portion of its treasury to volatile altcoins, saw its stock lose over 85% of its value from its June 2025 peak. Such extreme volatility underscores the danger of conflating speculative assets with corporate capital preservation.

Forced Selling Spirals and Downward Pressure

As stock prices fall below the value of their crypto holdings, companies face mounting pressure to sell Bitcoin to fund buybacks or meet dividend obligations. This dynamic creates a self-reinforcing cycle: falling equity prices force crypto sales, which further depress Bitcoin prices, triggering more liquidations. Strategy Inc., a firm holding 650,000 BTC (3% of the maximum supply), has explicitly acknowledged it may sell Bitcoin if its market value falls below the net asset value of its holdings. This reversal of Michael Saylor's original thesis-once focused on perpetual Bitcoin accumulation-has sparked fears of a cascading sell-off.

The risk is not hypothetical. In November 2025, Bitcoin's order book depth at the 1% price band plummeted to $14 million, down from $20 million in early October. This thin liquidity means even modest forced liquidations from overleveraged firms could trigger sharp price declines. Retail traders, already wary of macroeconomic uncertainty, have begun preemptively selling assets, exacerbating the downward spiral.

Liquidity Constraints and Market Amplification

The structural weaknesses of Bitcoin treasury companies are compounded by broader liquidity challenges in the crypto market. Unlike traditional assets, Bitcoin's trading infrastructure lacks the depth and institutional participation of equities or bonds. Data from highlights how a $14 million order book depth in November 2025 left the market vulnerable to large, sudden sales. For companies with crypto holdings valued in the hundreds of millions, even a small percentage of forced sales could trigger a price collapse.

This fragility is further exposed by the rise of in-kind contribution deals, where companies use their own illiquid tokens to fund digital-asset treasuries. A Bloomberg report notes that firms like Tharimmune and Flora Growth contributed unlisted tokens to finance Bitcoin purchases, shifting risk to retail investors who now face steep stock declines as these tokens lose value. Such practices blur the line between corporate finance and speculative trading, leaving retail investors exposed to double-digit losses.

Contrasting Perspectives and Systemic Risks

While some analysts argue that Bitcoin treasury companies reflect genuine institutional adoption of digital assets, the reality is more nuanced. A report by acknowledges that Bitcoin's role as a financial asset is evolving but cautions that the current model is inherently speculative. The reliance on debt to fund non-income-producing assets creates balance sheet fragility, particularly in a macroeconomic environment marked by rising interest rates and tightening credit conditions.

Moreover, the interconnectedness of these firms raises systemic risks. If a major Bitcoin treasury company defaults or is forced to liquidate its holdings, the resulting price shock could ripple through the broader market, triggering margin calls and further sell-offs. This domino effect is not just theoretical-it is a structural feature of the model.

Conclusion

The Bitcoin treasury experiment has exposed the dangers of conflating speculative asset accumulation with corporate financial prudence. As volatility persists and liquidity constraints tighten, the forced selling dynamics inherent in this model threaten to undermine both individual firms and market stability. For investors, the lesson is clear: while Bitcoin may hold long-term value, the current structure of corporate treasuries is ill-suited to navigate the turbulence of a volatile market. The growing risks of this strategy demand caution, transparency, and a reevaluation of the balance sheet realities that underpin it.