Corporate Bitcoin Rush Fuels Debt and Doubts

Software firm Strategy has spent the last few years buying billions of dollars worth of bitcoin.

Now, a host of other companies — ranging from hoteliers to electric vehicle makers — are following suit, the Financial Times (FT) reported Friday (Aug. 8).

These businesses, the report added, are backed by investors who see a chance to tap into the crypto market without risking direct exposure to digital assets.

As of Aug. 5, around 154 public companies have this year either raised or committed $98.4 billion to purchase crypto, the FT said, citing crypto advisory firm Architect Partners. Prior to this year, $33.6 billion had been raised by just 10 companies.

The FT notes that the scramble to stockpile crypto is happening during a year in which both the price of bitcoin and the larger stock market have enjoyed record highs, with traditional investors trying to determine the best way to get involved in the digital asset sector.

However, the report adds, there’s substantial doubt that this trend has much longevity, with the rapid growth leaving some investors worried about oversaturation; one venture capitalist compared it to the late 90s dotcom bubble.

The flood of new companies into the crypto space has also led to concerns about the fallout from a price drop, as businesses are taking on billions of dollars in debt to finance their purchases and could soon find themselves unable to pay back creditors.

“The risk is that bitcoin crashes,” says Eric Benoist, a tech and data specialist for the investment bank Natixis. 

In this scenario, stock prices will also plunge, and if companies cannot repay their bondholders, costing investors money, “it could be systemic for the bitcoin ecosystem,” he added. “Every time there’s a small panic in the market, the whole thing drops.”

Meanwhile, PYMNTS spoke last week with Dave Merin, co-founder and CEO of The Ether Machine, about his company’s plans to build a war chest of more than $1.5 billion in ethereum. The week leading up to the interview, The Ether Machine had spent close $100 million acquiring more of the increasingly popular cryptocurrency.

“Everything we’re doing is built to be institutional grade from day one,” Merin said. “No legacy liabilities, no operating distractions — just exposure to the most important digital asset since bitcoin, but done in a way that’s dynamic, thoughtful and structurally superior.”

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