Standard Chartered says corporate demand for Bitcoin is about to make it crash

Corporate wallets are filling up with Bitcoin, and Standard Chartered thinks that could soon blow up in everyone’s face.

In a new report released yesterday, the bank said businesses that recently joined the crypto frenzy are loading up at high prices—and if the market takes a hit, they might dump their coins fast. That’s not just bad for them. That’s bad for everyone else holding Bitcoin, too.

According to Standard Chartered, the number of companies buying Bitcoin to hold on their balance sheets has doubled in the past two months, pushing total holdings close to 100,000 coins. 

This increase has helped drive the recent price rally, but analyst Geoff Kendrick, who leads the bank’s digital asset research, said the buying pressure could flip and crush the market if those companies decide to get out.

Corporate buyers face risk of becoming forced sellers

Geoff said, “Bitcoin treasuries are adding to bitcoin buying pressure for now, but we see a risk that this may reverse over time.” He explained that most companies in the bank’s sample have net asset value multiples above 1, which for now looks fine thanks to regulatory restrictions and slow-moving investment policies.

But he warned that if those roadblocks disappear, there’s nothing stopping the same companies from turning into sellers, not buyers. Geoff pointed out that many of these new corporate buyers didn’t get in cheap.

Unlike Strategy—previously MicroStrategy—which is known for stacking Bitcoin at lower levels, most of these newer players bought at much higher prices. If the price of Bitcoin drops below $90,000, Geoff said half of them would be underwater. And if the price falls 22% below their average buy-in, they’d likely be forced to sell.

He asked the key question: “How much pain can companies withstand before being forced to sell their bitcoin?” Geoff brought up Strategy’s situation in November 2022, during the FTX collapse. At the time, Bitcoin nosedived from $31,000 to $15,500, but Strategy kept holding. 

He said that might’ve been because their dollar losses weren’t that big, and because back then, US spot Bitcoin ETFs didn’t exist, so Strategy still served a purpose for traditional investors. Now that spot ETFs are on the market, that purpose is gone.

Geoff said none of the newer entrants would survive a similar drop. In his words, “We do not think any of the newer entrants to the bitcoin treasury space could continue holding their bitcoin if bitcoin prices were to fall 50% below their average purchase price.”

The bank said it’s tracking 61 companies that hold Bitcoin just to keep it—not companies in the industry like miners, crypto exchanges, asset managers, ATM firms, or Tesla.

These 61 companies make up a small part of the 110 public companies globally that own Bitcoin, but they matter because they’re outside the crypto space. And together, as of press time, they own 673,897 Bitcoin. That’s about 3.2% of the total 21 million supply.

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