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Investing.com -- A growing number of publicly listed companies are holding Bitcoin on their balance sheets, but Standard Chartered (LON:STAN) warns that price volatility could soon trigger a wave of forced liquidations if conditions deteriorate.
In a Tuesday report, Standard Chartered’s top digital assets analyst Geoff Kendrick identifies a “pain level of 22% below the average purchase price as a potential liquidation level” for corporate treasuries holding Bitcoin.
Currently, 61 companies classified as Bitcoin treasuries—those not otherwise involved in crypto but holding Bitcoin for balance sheet diversification—control a combined 673,897 BTC, or 3.2% of all Bitcoins that will ever exist.
Kendrick highlights that half of these firms acquired their holdings at an average price above $90,000.
“If Bitcoin prices were to fall 22% below average purchase prices, they may become forced sellers,” he wrote, referencing the 2022 collapse of Core Scientific as a precedent. At that time, the miner sold thousands of BTC when prices dropped just 22% below its cash cost.
MicroStrategy (NASDAQ:MSTR), which pioneered the corporate Bitcoin treasury model, holds the majority of these reserves—86% of the total—and has a much lower average purchase price of $70,000.
However, newer entrants are more exposed. “Their holdings have doubled in the last two months to just below 100,000 BTC, and their average purchase prices are higher than MSTR’s in most cases,” Kendrick notes.
The report also flags a longer-term structural concern. While most treasuries now have net asset value (NAV) multiples above 1 due to limited investor access and institutional constraints, Standard Chartered expects that “NAV multiples above 1 would then become unsustainable” as ETF access improves.
This could put “downward pressure on the equity prices of the Bitcoin holders.”
The bank cautions that while the long-term outlook for Bitcoin remains constructive, near-term volatility may expose vulnerabilities in these treasuries. “It would only take a move back below USD 90,000 to put half the Bitcoin treasuries (by number of companies) underwater.”
The key issue, then, Kendrick argues, is how much pain companies can withstand before being forced to sell their Bitcoin holdings.