As large companies increasingly pile Bitcoin into their portfolios, a new report from Standard Chartered brings a strong warning, suggesting that this trend could end up backfiring for the crypto market as a whole.
Head of Digital Asset Research at Standard Chartered, Geoffrey Kendrick, highlights that many new companies entering the Bitcoin market are buying in large amounts, and at prices that are not cheap. If the market were to sharply correct at some point, they could potentially become panic sellers driving the price down further.
"Right now it looks healthy, as corporate buying is still pushing Bitcoin prices up," said Kendrick. "But this situation could turn around at any time."
Standard Chartered notes that in the last two months, the number of companies placing Bitcoin on their balance sheets has doubled, with total holdings nearing 100,000 BTC. This surge has clearly contributed to the recent Bitcoin price rally.
However, according to Kendrick, the majority of these companies may not have strong resilience against volatility. Many of them entered at high prices, unlike Strategy (previously MicroStrategy) which is known for accumulating since lower prices.
He emphasizes that if the price of Bitcoin drops below $90,000, half of these new companies will experience unrealized losses. Worse yet, if the price drops 22% from their average purchase price, some could be pushed to sell massively to avoid deeper losses.
Kendrick further argues, how much pressure can companies withstand before ultimately giving up and selling all their Bitcoin holdings. He compares this situation to the events in November 2022 when FTX collapsed. At that time, Bitcoin plummeted from $31,000 to $15,500.
However, Strategy remains calm and has not sold a single coin. One of the reasons includes that there is no spot Bitcoin ETF yet, and Strategy at that time was still the only alternative Bitcoin exposure for institutional investors.
"But now, the conditions are different," explains Kendrick. "Spot ETFs are available, and these new players do not have a strategic position like Strategy. We doubt they can survive if the price falls by 50% from their entry point."
Furthermore, the Standard Chartered report states that 61 companies they monitor hold Bitcoin solely as a treasury asset, not because they are part of the crypto industry like miners, exchanges, or technology companies like Tesla.
The combined companies currently hold 673,897 BTC, equivalent to about 3.2% of the total Bitcoin supply limited to only 21 million coins. Although they are not the majority, the collective decision of this group could trigger significant market movements, especially if there is a surge in selling pressure.