1 Thing Every Cryptocurrency Investor Needs to Know About Bitcoin Treasuries
Key Points
Strategy and other Bitcoin treasury companies aim to accumulate as much Bitcoin as possible on their balance sheets.
Some achieve this by using debt to buy more Bitcoin.
Leverage significantly increases risk and has led to big losses for these companies during the recent Bitcoin downturn.
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In August 2020, software company Strategy (NASDAQ: MSTR) changed its business model when it started buying Bitcoin (CRYPTO: BTC). It officially rebranded as a Bitcoin treasury company in February 2025, and over 100 companies now follow the same approach.
At times, Bitcoin treasury companies have outperformed the cryptocurrency itself. While that may sound like an advantage, it's actually related to one of the dangers of this type of business.
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Using leverage for increased buying power
Bitcoin treasury companies don't always just buy Bitcoin with cash on hand. Many of them use debt to purchase even more. For example, Strategy has issued secured bonds and convertible bonds, along with selling stock.
It has worked, at least in terms of increasing Strategy's stockpile. The company has 671,268 BTC on its balance sheet, worth $59 billion (as of Dec. 25), by far the most of any publicly traded company.
However, leverage increases your risk, whether you're a retail investor or a corporation. Using leverage to buy a volatile asset like Bitcoin looks like a brilliant move during bull markets, but it can turn against you quickly, as we've seen with Bitcoin's recent decline.
Over the last three years, Strategy has risen by 876%, crushing Bitcoin's 420% return. But over the last six months, it's a different story. Bitcoin has lost 17% of its value, while Strategy has plummeted by 59%.
Bitcoin is risky enough for me without using any leverage. I have a small portion of my portfolio in Bitcoin and other cryptocurrencies, and I'd rather stick with owning the coins than putting my money into a Bitcoin treasury company.
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Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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