Bitcoin treasury companies can give investors greater exposure to the cryptocurrency’s gains, but the amplification works in both directions, according to The Smarter Web Company CEO Andrew Webley.
In a recent interview with BTC advocate Stephen Livera, Webley also warned that unlike Bitcoin itself, these companies depend on management teams whose capital allocation decisions can materially affect shareholder returns.
Bitcoin Exposure Comes With Added Volatility
Webley identified two risks investors need to understand, the first being volatility. Bitcoin is less volatile than it used to be, the CEO conceded, but it still swings more than many assets investors hold, and a treasury company “amplifies that volatility,” and investors cheer that on the way up and mostly dislike it on the way down.
“People don’t like it when I say it, but you can’t have it both ways,” Webley remarked. “You can’t have performance and no volatility.”
The second risk is management execution, which decides whether these companies work or not. According to Webley, executives have numerous decisions to make, particularly around capital structure, and choices that might allow a firm to grow faster could come at the expense of shareholders.
“Bitcoin has no management,” he stated. “A Bitcoin treasury company, the management could really, really mess it up.”
That leaves treasury-stock investors with a choice that Bitcoin holders do not face in the same form: accepting Bitcoin’s volatility while also trusting a management team to make the right financing and accumulation decisions.
Strategy and Strive Show the Trade-Off
The scale of the current treasury operations helps explain why those decisions matter. As CryptoPotato reported yesterday, Strategy bought another 334 BTC for $28.7 million, taking its holdings to 848,000 BTC. The company has spent almost $64 billion accumulating Bitcoin at an average price of $75,441.
On the same day, Strive bought 2,000 BTC for $169 million at an average price of $84,422, bringing its holdings to 29,462 BTC. The company’s CEO Matt Cole argued that his firm can generate greater returns than their bigger rival through a higher amplification ratio, with Strive’s ratio at 51.4%, compared with roughly 25% for Strategy. Cole also projected that Bitcoin could reach $400,000 to $500,000 by late 2029.
At the time of writing, the OG cryptocurrency’s price was still some way from that target. It was rejected at $87,000 on Monday morning after a weak US jobs report had pushed it above that level on Friday for the first time in ten days, but it fell below $84,000 within hours, leaving nearly $600 million in liquidations.
The latest CoinGecko reading has it within touching distance of $86,000, down half a percent in 24 hours but up nearly 7% across 30 days. However, it is still about 32% below its $126,000 all-time high.
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