Bitcoin Treasury Strategy: Wall Street’s New Trend at Risk

For over three decades, Wall Street has been captivated by the latest trends and innovations that promise to reshape the financial landscape. Starting with the rise of the internet in the mid-1990s, each era has brought forth groundbreaking innovations that have captured investor interest and transformed market dynamics.

Since late 2022, one of the most transformative innovations has emerged in the form of artificial intelligence (AI). This technology equips software and systems with the ability to think critically and make instant decisions without human assistance, thereby benefiting a multitude of industries worldwide.

However, AI is not the only trend attracting substantial investment. In recent months, there has been a notable surge in interest towards publicly traded companies that are adopting Bitcoin (BTC -1.34%) treasury strategies as part of their financial management approaches.

Image source: Getty Images.

These so-called “Bitcoin treasury companies” aim to acquire and retain a substantial amount of the world’s leading cryptocurrency by market capitalization within their treasury reserves, effectively using cash holdings to capitalize on the potential long-term returns of Bitcoin and to hedge against monetary inflation.

While one company has recently brought significant attention to this innovative strategy, there is an abundance of evidence and historical data indicating that the Bitcoin treasury strategy is likely to meet with failure.

Leading the Charge: The First Company to Embrace Bitcoin Treasury Strategy

Although numerous public companies now hold at least 100 Bitcoins on their balance sheets, none has become the quintessential representative of the Bitcoin treasury strategy quite like Strategy (MSTR -1.18%), formerly known as “MicroStrategy.”

For many years, Strategy focused on developing enterprise analytics software, which has recently included AI solutions. However, a pivotal shift occurred nearly five years ago, on August 11, 2020, when Strategy made headlines by acquiring 21,454 Bitcoins for approximately $250 million—a groundbreaking move at the time.

This acquisition marked the first instance of a public company purchasing such a significant amount of Bitcoin. Following this initial investment, Strategy’s Bitcoin holdings surged to 568,840 tokens, leading to an astonishing stock price increase of over 2,900%! The company has invested around $39.4 billion to amass approximately 2.71% of all Bitcoins that will ever exist, including those generated by future crypto mining.

One of the primary drivers behind Strategy’s success is the perceived scarcity of Bitcoin. With a maximum supply capped at 21 million tokens, the constant expansion of the U.S. Treasury’s money supply elevates Bitcoin’s allure as a potential store of value. The ongoing devaluation of the U.S. dollar, combined with persistent inflation, makes Bitcoin an increasingly attractive asset for investors.

Additionally, CEO Michael Saylor is adeptly leveraging the recency bias among investors. Over the past 15 years, no other asset class—be it stocks, commodities, bonds, or real estate—has come close to matching the staggering returns generated by Bitcoin.

Furthermore, Strategy has capitalized on what some investors refer to as the “infinite money glitch” discussed in various online forums. By utilizing seemingly endless at-the-market share offerings alongside occasional preferred stock offerings, Saylor’s company has been able to generate capital for further Bitcoin purchases. If Bitcoin’s price continues its upward trend, it would likely bolster Strategy’s stock price, enabling even more capital to be raised for additional Bitcoin acquisitions—creating a self-perpetuating cycle.

While the Bitcoin treasury model has proven effective for Strategy and has led to notable stock price spikes for smaller public firms announcing their own Bitcoin treasury initiatives, there are several compelling reasons to believe that this short-term success is unsustainable and may culminate in significant failures.

Image source: Getty Images.

Impending Crisis: The Flaws of the Bitcoin Treasury Strategy

One of the primary concerns surrounding the Bitcoin treasury strategy is that it reveals a lack of genuine innovation and operational success within the companies adopting this model. By committing a substantial portion of their cash reserves to Bitcoin, these firms are essentially acknowledging their inability to innovate or enhance their existing operations.

This might be acceptable if we were discussing a market-leading stock that can maintain its competitive edge while generating excess cash from its operations. However, many firms pursuing Bitcoin treasury strategies struggle with profitability and growth.

For instance, Strategy’s software segment has experienced a sales decline exceeding 12% over the past decade (up to the end of 2024). Moreover, the enterprise analytics division is not generating positive cash flow. By shifting focus to Bitcoin purchases, Saylor and his board send a clear message that they lack genuine innovation and don’t have a concrete plan to improve the company’s primary source of revenue and cash flow.

MSTR Revenue (Annual) data by YCharts.

Another critical issue with the Bitcoin treasury approach is the flawed assumption that Bitcoin’s first-mover advantages will remain intact.

While Bitcoin has consistently defied skeptics over the past 15 years, this does not alter the reality that many of its competitive advantages are largely illusory.

For example, Bitcoin is not genuinely scarce. The only factors preventing its token count from increasing are a few lines of code and consensus among developers. In contrast, the amounts of gold, oil, and silver on Earth are finite and well-documented, whereas there is no guarantee that developers won’t opt to raise Bitcoin’s total supply.

Aside from being a recognizable name in the cryptocurrency arena, Bitcoin doesn’t excel in any particular area. It’s neither the fastest payment network nor the most economical option. Additionally, it has failed to demonstrate real-world utility, as evidenced by its challenges in El Salvador.

Lastly, companies adopting the Bitcoin treasury model typically depend on Bitcoin’s price continuing to rise. While Bitcoin has experienced remarkable growth since mid-2010, it has also faced numerous steep bear markets.

Bitcoin Price data by YCharts. Chart dates: June 13, 2014-May 12, 2025.

Over the past decade, Bitcoin has lost as much as 74% of its value from peak to trough between mid-2014 and early 2015, plummeted by more than 80% from late 2017 to early 2019, and dropped by 76% from late 2021 to 2022. This analysis does not even consider the numerous declines ranging from 25% to 35% that have occurred throughout the last ten years. Such steep bear markets are a historical norm for Bitcoin and could easily force Bitcoin treasury companies—including Strategy—to sell their holdings at a loss.

While Bitcoin treasury purchases have contributed to artificially inflating Bitcoin’s price recently, forced liquidations during a bear market would further depress an already struggling cryptocurrency market.

Although public companies are currently excited about investing their excess cash into Bitcoin, this trend lacks true innovation and sustainability, failing to adequately address the growth requirements of their businesses.