When Corporate investment and public mania coincide, start and end the most spectacular market cycles.
1987, 1999-2001 (tech stocks), 2007-2008 (MBSs), 2010-2020s volatility.
MAAM_A1
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BTC AS SOV
BTC is a POTENTIAL not an actual STORE OF VALUE (yet).
The ability to adjust to inflation, is a critical quality of a STORE OF VALUE by which its value appreciates at a close or higher rates than the inflation rate.
BTC has more than outpaced inflation rates, although mainly because of speculative capital influx.
BTC is the most stable cryptocurrency (excluding stablecoins and TRX or $BNB ), in spite its value is not backed by any commodity or by a treasury with reserves in fiat currency or financial instruments (bonds, t-bills, or deposits.
Its valuation is determined by market dynamics (price discovery): supply and demand, market sentiment (as news influence investments and speculation), regulation (legality/taxes) and the cost of infrastructure (varying maintenance costs incurred by miners and light nodes).
TREASURIES
More than 235 companies across the world have issued corporate bonds to raise capital specifically for building their own $BTC treasuries. The aggregate corporate debt totals 12.7B USD (massive), with Strategy™ accounting for 8.2B USD.
Regardless of BTC true potential, this kind of capital influx discounts years of organic growth and poses an almost imminent risk of ruin to holders buying at present and in the near future.
All these institutions claim, their plan is to hedge against inflation, which would be credible if they were not purchasing on credit (resulting in massive liabilities).
Unfortunately, most new "players" are not investing in BTC as a hedge, what most want is to win the same lottery a Strategy did before, on premises that are being cancelled by their own actions.
Coincidental purchases (all corporations buying at the same time) inevitably inflates the price, and in a bubble like fashion the market is increasigly vulnerable to a market correction.
Assuming they are not under the influence but had compelling reasons, Institutions in the US and elsewhere should be concerned about giving BTC a real commodity status before assuming their investment would be exempt from a violent correction.
If BTC experience the same high volatility of previous years, recent purchases would be at risk of 20-40% unrealized losses, which would inevitably put many corporations in risk of default. The price of BTC will not only impact cash reserves, but also its stock price, as the loss in equity (NAV) will result in lower market value.
From all these corporations, the least solvent ones, would be the first to default.
I will make the case of Opportunistic Corporations, which refers to companies with terrible financials in real terms, that is, performance after considering liabilities, specially existing debt.
Simply put:
Since these opportunistic corporations rely solely on the appretiation of BTC to yield, given their leverage, they are unlikely to survive volatility.
If they cannot service their debt with their own cashflow under financial distress (drawdowns described above), and a extreme volatile situation coincides with their own internal financial problems and the maturity of their bonds, the first asset to liquidate would be their BTC treasuries (cash equivalent). Then, by forcefully liquidating assets at a loss, its stock will tumble and the selloff will depress the price of BTC at the same time. With their solvency at stake, why would they sell BTC? Because most would not risk to sell their own stock at the expense of their equity, nor they could issue more debt (zero-creditworthiness).
Currencies work using a reserve ratio as reference, that is a ratio between the amount of outstanding units of one against the counterpart. So, the BTC markets needs a unsatiable demand for units at Spot price to sustain its levels.
The total +12B USD in treasuries is minimal for BTC +2T market capitalization, but is significant for liquidity. A Selloff as "small" as 1B triggers tremendous volatility, and amounts largers than usual would do worse.
If selloffs are incidental to the debacle of some of this corporations, the news and "experts" will inadequately blame BTC for the failure of the BTC treasuries, not their individual financials. Hence, the public sentiment towards crypto will turn negative once more, resulting in panic and further selloffs. Without interest to invest in crypto, nobody will "buy the dip" and the recovery will be slow and erratic.
A sudden and severe price drop will inevitably trigger an abnormal volume of liquidations, and that is the real danger of speculation.
#BTCWhaleMovement #bitcoin
The ability to adjust to inflation, is a critical quality of a STORE OF VALUE by which its value appreciates at a close or higher rates than the inflation rate.
BTC has more than outpaced inflation rates, although mainly because of speculative capital influx.
BTC is the most stable cryptocurrency (excluding stablecoins and TRX or $BNB ), in spite its value is not backed by any commodity or by a treasury with reserves in fiat currency or financial instruments (bonds, t-bills, or deposits.
Its valuation is determined by market dynamics (price discovery): supply and demand, market sentiment (as news influence investments and speculation), regulation (legality/taxes) and the cost of infrastructure (varying maintenance costs incurred by miners and light nodes).
TREASURIES
More than 235 companies across the world have issued corporate bonds to raise capital specifically for building their own $BTC treasuries. The aggregate corporate debt totals 12.7B USD (massive), with Strategy™ accounting for 8.2B USD.
Regardless of BTC true potential, this kind of capital influx discounts years of organic growth and poses an almost imminent risk of ruin to holders buying at present and in the near future.
All these institutions claim, their plan is to hedge against inflation, which would be credible if they were not purchasing on credit (resulting in massive liabilities).
Unfortunately, most new "players" are not investing in BTC as a hedge, what most want is to win the same lottery a Strategy did before, on premises that are being cancelled by their own actions.
Coincidental purchases (all corporations buying at the same time) inevitably inflates the price, and in a bubble like fashion the market is increasigly vulnerable to a market correction.
Assuming they are not under the influence but had compelling reasons, Institutions in the US and elsewhere should be concerned about giving BTC a real commodity status before assuming their investment would be exempt from a violent correction.
If BTC experience the same high volatility of previous years, recent purchases would be at risk of 20-40% unrealized losses, which would inevitably put many corporations in risk of default. The price of BTC will not only impact cash reserves, but also its stock price, as the loss in equity (NAV) will result in lower market value.
From all these corporations, the least solvent ones, would be the first to default.
I will make the case of Opportunistic Corporations, which refers to companies with terrible financials in real terms, that is, performance after considering liabilities, specially existing debt.
Simply put:
Since these opportunistic corporations rely solely on the appretiation of BTC to yield, given their leverage, they are unlikely to survive volatility.
If they cannot service their debt with their own cashflow under financial distress (drawdowns described above), and a extreme volatile situation coincides with their own internal financial problems and the maturity of their bonds, the first asset to liquidate would be their BTC treasuries (cash equivalent). Then, by forcefully liquidating assets at a loss, its stock will tumble and the selloff will depress the price of BTC at the same time. With their solvency at stake, why would they sell BTC? Because most would not risk to sell their own stock at the expense of their equity, nor they could issue more debt (zero-creditworthiness).
Currencies work using a reserve ratio as reference, that is a ratio between the amount of outstanding units of one against the counterpart. So, the BTC markets needs a unsatiable demand for units at Spot price to sustain its levels.
The total +12B USD in treasuries is minimal for BTC +2T market capitalization, but is significant for liquidity. A Selloff as "small" as 1B triggers tremendous volatility, and amounts largers than usual would do worse.
If selloffs are incidental to the debacle of some of this corporations, the news and "experts" will inadequately blame BTC for the failure of the BTC treasuries, not their individual financials. Hence, the public sentiment towards crypto will turn negative once more, resulting in panic and further selloffs. Without interest to invest in crypto, nobody will "buy the dip" and the recovery will be slow and erratic.
A sudden and severe price drop will inevitably trigger an abnormal volume of liquidations, and that is the real danger of speculation.
#BTCWhaleMovement #bitcoin
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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