Bitcoin Treasuries Spark Division Among Crypto Fans: Are They Merely Fiat in Disguise?
Bitcoin treasury firms—organizations that accumulate the digital currency (often using borrowed money)—offer clients a way to gain indirect exposure through their stocks. Some believe these firms are ushering Bitcoin into Wall Street, while others argue they are transforming Bitcoin enthusiasts into what some label “fiat bros.”
Shift from self-custody to indirect Bitcoin ‘exposure’
In 2021, billionaire and X owner Elon Musk famously commented, “Your app sucks,” in reply to a crypto wallet that didn’t grant users access to private keys. With the ongoing wave of interest in Bitcoin ETFs and treasury firms, it may seem that self-custody is gradually becoming a relic of the past.
Although the dominant narrative centers on treasury firms investing millions of dollars (often borrowed) to acquire vast amounts of Bitcoin, numerous bitcoiners—who generally overlook “indirect exposure to Bitcoin”—remain active, albeit less prominent in social and mainstream media.
Indirect Bitcoin exposure, or ownership of ‘paper Bitcoin,’ means holding assets issued by firms that systematically accumulate Bitcoin. Prominent examples include stocks from Bitcoin treasury firms (like MSTR by Strategy) or exchange-traded funds (ETFs) from asset management firms that possess Bitcoin (such as IBIT by BlackRock), two prevalent asset classes providing Bitcoin exposure.
Owning these assets is believed to allow holders to gain from the price fluctuations of Bitcoin, which are mirrored in the value of these assets. Consequently, Bitcoin ETFs, treasury stocks, Bitcoin derivatives, and similar offerings are regarded as equivalent to holding Bitcoin, even though they are essentially just paper representations.
Are treasury firms a Trojan horse for Wall Street?
Some view treasury firms as a direct route for institutional and corporate players to enter the crypto space. In fact, acquiring stocks in Strategy is legally less complex for corporations than directly purchasing Bitcoin. With nearly 600,000 bitcoins, Strategy’s operations enable corporate buyers of MSTR stocks to experience Bitcoin’s price swings indirectly.
As these firms continue to accumulate bitcoins, they apply buying pressure that reduces the likelihood of steep price declines. Corporations that invest in treasury stock essentially invest in Bitcoin.
Michael Saylor, the Chairman of Strategy, aims to link the cryptocurrency landscape with traditional capital markets. Some perceive him and other treasury firms as a Trojan horse introducing Bitcoin to Wall Street.
In contrast, critics assert that these firms are turning bitcoiners into conventional finance investors instead. They highlight that, despite the hype surrounding Bitcoin, these companies function within the traditional finance framework and promote their stocks to both TradFi (traditional finance) and crypto audiences.
Notably, these firms do not pay their employees in crypto, nor do they accept Bitcoin as payment for their stocks, among other practices. Essentially, they do not offer any authentic Bitcoin experience for their clients or workforce.
For the TradFi sector, treasury firms represent an opportunity to capitalize on Bitcoin’s rise in value. However, for Bitcoin investors, they may appear as a disruptive element dissuading people from buying and holding Bitcoin in favor of traditional assets like stocks. The narrative surrounding the Bitcoin standard may simply function as a marketing strategy for the Bitcoin enthusiast audience.
While competition for investors is customary, many bitcoiners express dissatisfaction with how treasury firms have infiltrated Bitcoin-related media, promoting their agendas.
Proponents of self-custody argue that platforms like Bitcoin podcasts, Crypto X, and crypto events are effectively “shilling” for Strategy and Nakamoto stocks. Consequently, the opportunity for meaningful discussions among those who value independence and self-custody is dwindling.
Another concern regarding treasury firms is the security of their strategies; they may eventually have to sell off their Bitcoin holdings. Such actions could trigger a chain reaction, potentially overwhelming even large firms like Strategy.
A recent report from the venture capital firm Breed indicates that many Bitcoin treasury companies are unlikely to survive a “death spiral” instigated by a swift decline in Bitcoin prices.
The chances of these firms bouncing back after a crash are low, particularly given their centralized structure.