Institutions’ adoption of Bitcoin (BTC) has been rising rapidly in recent months, with many companies adopting Bitcoin’s financial strategy or warnings from US asset management giants.
According to the Bullock, Franklin Templeton, one of the leading US asset management companies, warned of risks associated with the institutional Bitcoin financial strategy.
Analysts at Franklin Templeton said the future of institutional BTC and cryptocurrency strategies is uncertain and depends on several key factors.
“Inspired by Michael Saylor’s strategy (previously micro-tactics), this speculative approach, which moved to Bitcoin, is gaining momentum rapidly, and isn’t limited to Bitcoin.
Cryptocurrencies such as Bitcoin, Ethereum, Solana and XRP are subject to corporate financial strategies, but 135 public companies have accumulated only BTC.
Sharplink Eth, Upexi and Sol Strategies have implemented SOL strategies, while Strategies, Metaplanet, and 21 have adopted BTC strategies. However, this has risks. ”
At this point, analysts at Franklin Templeton said that market-control ratios below 1 pose a set of risks.
According to analysts, if this ratio falls below 1, new share issuances could dilute and make it difficult for companies to raise additional capital without damaging existing shareholders, leading to a halt of capital formation.
Worse, if cryptocurrency prices fall, companies will be forced to cover cryptocurrency losses and sell their holdings to maintain the stock price, further reducing crypto prices, analysts said.
Analysts added that institutions’ Bitcoin and cryptocurrency models are looking to adopt a greater extent, but these companies could be very risky investments in the event of a major decline or long-term bare market.
“If Bitcoin and cryptocurrency prices fall, companies sell assets to protect the stock price. This can undermine the value of cryptocurrency and investors’ trust, negating a vicious cycle.”
*This is not investment advice.