Companies Betting On BTC Hit Structural Limits

The speculative momentum around bitcoin clashes with the reality of markets. Driven by the fervor of records and the unexpected support of Donald Trump, several publicly traded companies that based their financial strategy on accumulating BTC are suffering a violent correction. Their shares sometimes fall below the value of their crypto holdings, exposing the limits of a model relying almost entirely on bitcoin’s volatility.

A brutal drop : bitcoin values plunge

The euphoria that surrounded publicly traded companies accumulating bitcoin has abruptly turned into a stock market rout. These companies, whose shares rose as BTC reached new highs, are now undergoing a wave of massive selling.

Strategy, a flagship of this strategy, saw its share price drop from $457 in July to $328 this week, reaching its lowest level since April. The trend is similar for other players like the Japanese company Metaplanet or the British company Smarter Web Company.

These declines fit into a generalized sell-off environment in the crypto market, marked by a loss of confidence and high investor nervousness.

As explained Adam McCarthy, analyst at Kaiko, “these companies are essentially bets on volatility, with leverage. If bitcoin drops 3 %, their shares can fall four to five times more”.

This multiplied exposure amplifies panic, especially among retail investors, who sell urgently. “For retail users, it’s often a shock, which can worsen the decline when some sell out of fear”, adds McCarthy. Recent figures confirm the scale of the phenomenon :

• Strategy (United States) : share down 28 % since July, only gaining 13 % for the year ;

• Metaplanet (Japan) : a drop of more than 60 % since its June peak, despite a +105 % gain for the year ;

• Smarter Web Company (United Kingdom) : a decline of more than 70 % since June, after a rise triggered by the announcement of a bitcoin strategy in April ;

• Alt5 Sigma (Canada/United States) : shares down 61 %, despite the announcement of a $1.5 billion partnership with World Liberty Financial, a crypto project linked to Donald Trump.

These corrections reveal the fragility of a model based almost exclusively on the performance of an asset as volatile as bitcoin.

Structural flaws : a model without safety net

Beyond market volatility, it is the structural fragility of these companies that worries. Many of them have very little activity outside their bitcoin exposure.

“Beyond their bitcoin exposure, most of these companies have only modest fundamentals, so their valuation has no safety cushion”, analyzes Lale Akoner, market strategist at eToro.

This is notably the case of Smarter Web Company, which was originally a website design company. The simple strategic shift towards bitcoin was enough to boost its share price, but this momentum proved short-lived.

Moreover, there is their dependence on capital markets. These companies finance their BTC purchases through share or debt issuance. However, as Akoner points out: “access to markets can dry up when sentiment cools”.

This seems to have happened. The case of Alt5 Sigma is revealing. Despite the announcement of a $1.5 billion partnership with the crypto project World Liberty Financial linked to Donald Trump, the share price has lost more than 61% since June, proving that even spectacular announcements no longer reassure the market.

This situation now exposes these companies to a double risk: loss of investor confidence and inability to raise new funds. If the crypto market’s downward trend continues, some could end up with unbalanced balance sheets and no new resources, which would worsen their decline.