Coinbase has issued a warning regarding the growing trend of publicly traded companies investing heavily in Bitcoin. A top analyst from the company cautioned that this behavior could introduce “systemic risks” to the crypto market, particularly if Bitcoin’s price experiences a downturn.
In a recent report, David Duong, Coinbase’s Head of Research, highlighted the dangers that could arise from the increasing number of corporations amassing Bitcoin as part of their treasury. Currently, 126 publicly traded companies hold a staggering 819,857 BTC, collectively valued at over $87 billion. Duong expressed concerns that if these companies were compelled to liquidate their Bitcoin holdings to satisfy investor demands during a price decline, it might result in a widespread market sell-off.
Duong noted that new accounting rules implemented in December 2024, allowing firms to recognize unrealized crypto gains, have incentivized this Bitcoin accumulation. As Bitcoin has been on an upward trend, many corporations have taken the opportunity to invest billions in the cryptocurrency, driving their stock prices higher. However, Duong warns that if Bitcoin prices were to fall, these companies might have to sell off their holdings at a loss to repay investors.
The potential for a cascading sell-off is particularly alarming, as simultaneous selling by various firms could lead to drastic market liquidations. This scenario, referred to as an “attack of the clones” by Coinbase, suggests that the rush to liquidate assets in a downturn could destabilize the entire crypto ecosystem.
Despite recognizing the risk, Duong remains optimistic about Bitcoin’s overall trajectory, asserting that while such events could pose risks, they wouldn’t be as catastrophic as previous market crashes. However, he did label the situation as “systemic,” indicating that the ramifications could be significant for the crypto space if not managed properly.
Analysts from other finance firms, like Standard Chartered, have echoed similar concerns, predicting that many companies with substantial Bitcoin holdings could face challenges if Bitcoin’s price drops below $90,000.
In previous acknowledgments, Coinbase CEO Brian Armstrong pointed out the risks associated with corporate strategies akin to those being employed by various firms, indicating that in earlier days, such a move would have been considered too risky.
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