In 2025, while MicroStrategy (NASDAQ: MSTR) has seen its stock price surge by almost 30%, significantly outpacing Bitcoin’s (CRYPTO: BTC) 11% gain as of June 19, this impressive performance doesn’t automatically make the company a superior investment. For long-term investors, the prevailing advice still leans towards investing directly in Bitcoin rather than opting for a Bitcoin treasury company. Despite the recent proliferation of these corporate entities mimicking MicroStrategy’s model, the strategy of a Bitcoin treasury company may ultimately lack the long-term staying power that some market participants anticipate, raising questions about their sustainable value proposition.
The Rise of the Bitcoin Treasury Company
MicroStrategy initiated its strategy of accumulating Bitcoin in August 2020, eventually evolving into the world’s largest corporate holder of Bitcoin over the subsequent four years. The company formalized this transformation in February 2025, officially rebranding itself as a Bitcoin treasury company. While MicroStrategy retains a legacy software business, its core mission has undeniably shifted to aggressively acquire and hold Bitcoin, regardless of price fluctuations, treating the volatile digital asset as a primary treasury holding on its balance sheet, much like conventional cash reserves.
Inherent Volatility and Shareholder Impact
The fundamental difference between holding cash and holding Bitcoin on a company’s balance sheet lies in Bitcoin’s inherent volatility. When the price of Bitcoin experiences an upward trend, this can be immensely beneficial, allowing the company’s value to appreciate dramatically with minimal operational effort. Conversely, a downturn in Bitcoin’s price directly impacts shareholder equity, leading to a significant hit to the company’s valuation. This direct correlation means shareholders are immediately exposed to the unpredictable swings of the cryptocurrency market, affecting the perceived health of the business.
The Perils of Debt-Fueled Bitcoin Purchases
While individual investors might ride out Bitcoin downturns, the situation is more complex for Bitcoin treasury companies. These entities are increasingly financing their Bitcoin acquisitions through various forms of debt, including convertible notes and senior secured notes, rather than solely using cash from operations. Since these companies often make no pretense of generating sufficient cash flow beyond basic expenses, this reliance on debt introduces significant risk. Some observers describe this as a “Bitcoin loop,” where new debt issuances fund more Bitcoin purchases, which in turn inflates the company’s value, attracting more investors for subsequent debt offerings.
Concerns Over a Potential Ponzi Scheme
The sustainability of this debt-fueled “Bitcoin loop” raises serious questions, particularly regarding how long it can realistically continue. The entire model fundamentally rests on the premise that Bitcoin’s value will continuously appreciate indefinitely, a highly speculative assumption. Consequently, some corporate finance professors and financial analysts have controversially characterized the Bitcoin treasury company business model as a potential Ponzi scheme in the making. This alarming assessment has begun to capture the attention of some Wall Street hedge fund managers, who are now arguing that companies like MicroStrategy could be wildly overvalued based on this inherently risky strategy.
Coinbase Sounds the Alarm
Concerns about the risks associated with Bitcoin treasury companies are not limited to academics and hedge funds; even major players in the crypto industry have voiced warnings. Coinbase Global (NASDAQ: COIN), a leading cryptocurrency exchange, notably sounded the alarm in a recent report titled “Attack of the Clones.” This report specifically warned of the “imminent risk of systemic collapse” as numerous companies brazenly rush to acquire as much Bitcoin as possible. Coinbase posits that in a worst-case scenario, the collapse of even a single highly leveraged Bitcoin treasury company could be sufficient to drag down the entire crypto market, highlighting interconnected systemic vulnerabilities.
The Inexperience of New Entrants
While the long-term collapse of MicroStrategy, which has accumulated Bitcoin for years, might not be an immediate fear, there is significant concern regarding the influx of smaller, less experienced companies entering the Bitcoin treasury space. Since February 2025, when MicroStrategy officially rebranded, the number of new firms adopting this strategy has become almost too numerous to count. Many of these new entrants possess little to no prior experience with crypto, exacerbating the inherent risks associated with high leverage and speculative asset holdings, potentially making them more susceptible to market downturns and exacerbating overall market instability.
Direct Bitcoin Investment: The Safer Path
Ultimately, the decision of whether to invest in the concept of a Bitcoin treasury company as a stroke of genius or a risky gamble rests with individual investors. However, the core principle of investing dictates that higher potential rewards are intrinsically linked to higher levels of risk. Bitcoin treasury companies achieve their outperformance by taking on more risk, specifically through the use of leverage. From an investor’s perspective, buying Bitcoin directly, without the added layer of corporate leverage and the associated risks, is generally considered the more prudent approach. Investing in crypto is already risky enough; there is no need to introduce even more risk into the equation by investing in leveraged corporate vehicles.
