‘forest Fire’: Corporate America’s Bitcoin Buying Spree Fuels Concern

Corporate America is finally embracing bitcoin. That has even some cryptocurrency boosters nervous.

In the latest sign of how President Donald Trump’s election has changed the perception of the digital assets industry, dozens of companies have begun pouring billions of dollars into bitcoin, creating so-called crypto treasuries. The emerging trend was underscored recently when Trump’s own social media company, Trump Media & Technology Group, unveiled plans to raise and spend about $2.5 billion on bitcoin.

The gambit of selling stock and debt to buy bitcoin is helping to turbocharge the companies' shares as crypto prices soar. Yet critics warn that hoovering up digital assets could backfire whenever the volatile crypto markets take a turn for the worse. And some fear that the rush of corporate investors presents a risk to crypto itself that could feed into any panic during the market’s next selloff.

“It’s a lot of kindling being built up,” said Nic Carter, founding partner at Castle Island Ventures, a crypto-focused investment firm. “There’s going to be a forest fire, and it’s going to be catastrophic.”

Washington is beginning to take notice. Sen. Jeff Merkley, an Oregon Democrat who has criticized Trump’s enthusiasm for the upstart industry, raised concern about companies “investing in crypto despite its financial risks and potential for corruption,” in a statement to POLITICO.

A former Wall Street regulator, who was granted anonymity to speak candidly, said the rise of corporate crypto treasuries — particularly those that are being built up through debt — could be “the instigator of the next crypto crash.” And Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, warned that the fallout from any future crypto crisis could reach beyond digital assets.

"When crypto crashed in 2022, the shock stayed mostly inside the crypto bubble, so our broader economy kept humming," Warren said in a statement. "If businesses start piling crypto onto their balance sheets, the next bust won't be so contained, and it could trigger layoffs and business failures in multiple sectors."

Still, the crypto market is riding high five months after Trump took office and kicked off his campaign to make the U.S. the "undisputed bitcoin superpower" and the "crypto capital of the world."

Trump's financial regulators have pulled back from an enforcement crackdown on the industry. The White House and Republican lawmakers have made crypto legislation a priority. And investors are latching onto anything tied to the roaring industry. Bitcoin recently notched an all-time high of nearly $112,000.

More than 60 publicly listed companies around the world had bitcoin treasury operations that collectively owned more than 673,000 bitcoins — valued at more than $75 billion — as of the end of May, according to Standard Chartered. Among them is Trump Media, which announced late last month that it was selling about $1.5 billion worth of stock and another $1 billion in debt to buy bitcoin.

CEO Devin Nunes said at the time that bitcoin is “an apex instrument of financial freedom, and now Trump Media will hold cryptocurrency as a crucial part of our assets.” A spokesperson for Trump Media did not respond to a request for comment.

"Everybody wants it as a balance-sheet item," Eric Trump, the president's second son who has become a leading voice for the family business, said at a recent bitcoin conference. "Everybody wants it, no one wants to get rid of it, and it's incredibly powerful. I think you're going to see the value skyrocket."

But the concern over companies bingeing on bitcoin is underscoring an uncomfortable truth about the 17-year-old market. While crypto may be the object of intrigue from investors and policymakers, it remains a risky asset class known for wild price swings — the next batch of which could leave an even broader array of mom-and-pop investors facing steep losses.

“The crypto industry is just prone to everyone being overly optimistic during the booms and then coming to regret it during the bust,” said Omid Malekan, an adjunct professor at Columbia University who teaches courses on blockchain technology and crypto.

Pioneered by billionaire Michael Saylor’s Strategy, a software company-turned-bitcoin giant, corporate crypto treasuries have amassed a growing following.

Other companies that have jumped into the craze include former Japanese hotel company Metaplanet, the Trump-backed bitcoin firm American Bitcoin and a string of new ventures that are being set up to buy and hold bitcoin. Some have expanded into holding other tokens.

“It’s the institutionalization of crypto adoption,” said Ravi Doshi, global co-head of markets at crypto financial services firm FalconX. “You have more and more individuals buying crypto assets every day. But now, you’re going to also see institutions do the same. … Companies have for years had U.S. Treasuries sitting on their balance sheets and now, they’re like, ‘You know what, actually bitcoin deserves a spot, [too].’”

Wall Street has generally celebrated crypto-treasury companies with higher stock prices.

The proliferation of such entities, proponents say, is offering investors greater access to the crypto markets. Those include bond fund managers who can only dabble in debt products and individual investors whose brokerages don’t allow them to trade crypto-linked investment products.

Companies are also able to cheaply raise cash through the stock and debt markets that can then be used to buy more bitcoin, effectively allowing them to multiply their returns on investment, Doshi said.

Yet, whether investors will keep rewarding crypto-treasury companies is unclear. Currently, many of those stocks are trading at premiums relative to the value of their underlying bitcoin holdings. But critics like Jim Chanos, the long-time hedge fund manager who is best known for his bet against Enron before the company's spectacular collapse in the early 2000s, warn that those levels are unsustainable and bound to plunge should crypto start selling off.

“They call it the flywheel concept. I call it a financial perpetual motion machine," said Chanos, who has been betting against Strategy's stock. He added that because the companies are not doing anything distinct for their businesses, they risk being "competed away."

"This is going to be self-defeating," he said.

Castle Island Ventures’ Carter said the use of debt by companies to buy bitcoin for their treasuries is particularly worrisome. That’s because whenever the market drops, they may need to start dumping the crypto, fueling the decline.

For Christy Goldsmith Romero, who recently stepped down as a commissioner at the Commodity Futures Trading Commission, companies need to make sure they are managing their finances appropriately. If not, she said, there is “certainly a risk” that those with crypto treasuries will wind up strapped for cash during a downturn in the market and be forced to sell their bitcoin.

But some crypto-treasury companies aren’t fretting. In an interview, Twenty One Capital CEO Jack Mallers, whose newly formed bitcoin treasury company is backed by crypto giant Tether and recently struck a deal to go public on Wall Street, said if others wind up over their skis and are forced to sell bitcoin, they’ll be there “with smiles and dollars to buy it all up.”

“You don’t buy scarce, desirable property and then get rid of it,” Mallers said. “Leverage is only a problem when you exceed your means. Borrowing capital, taking out a loan — that's actually how society has been financed."