The Promise and Perils of Bitcoin Treasury Companies
Terra-Luna was one of the earliest Bitcoin Treasury Companies, evidence that highlights a critical reality: not all companies with a Bitcoin strategy are created equal. Its dramatic collapse in 2022 is a stark warning that slapping Bitcoin onto a flawed or fraudulent business model doesn’t make it sound. As Bitcoin Treasury Companies multiply, they spark unease, stirring memories of past crypto scams while raising concerns about risk and resilience. This article delves into why these companies make us uncomfortable, contrasts their approaches with Terra-Luna’s failure, and offers practical guidance for companies and individuals navigating this evolving landscape.
Why Bitcoin Treasury Companies Feel Uncomfortable
Bitcoin Treasury Companies unsettle us for four reasons. First, the leverage-fueled DeFi and crypto scams of 2021–2022, like Terra-Luna, left retail investors with billions in losses. Second, these companies introduce counterparty and execution risks, a far cry from the security of Bitcoin in cold storage. Third, the wave of SPAC pump-and-dumps during the crypto boom fuels skepticism about unsustainable hype. Finally, the promise of “outperforming” Bitcoin keeps plebs trapped in a fiat system, fostering a nagging sense that “this can’t end well.” These concerns aren’t just vibes—they’re grounded in history. While all valid concerns, the knee-jerk conclusion that Bitcoin Treasury Companies are the cause of the next blow-up isn’t supported by facts.
Terra-Luna: A Shitcoin Scam, Not a Bitcoin Treasury Company
Terra-Luna wasn’t a Bitcoin success story—it was a shitcoin scam. Its collapse stemmed from the inherent vulnerable doom loop of incentives in its protocol, a failed attempt to rescue its peg by dumping Bitcoin reserves, and systemic contagion from DeFi’s rampant lending and rehypothecation. The DeFi boom created interdependent linkages—lending, leverage, looping, and rehypothecation—that collapsed, wiping out billions for retail participants. Bolting on Bitcoin didn’t save Terra-Luna; it exposed its flaws. A hungry market will always seek out weaknesses to exploit, snatching Bitcoin at a discount.
This contrast was crystallized in March 2022, when Do Kwon tweeted at Michael Saylor, mocking MicroStrategy’s Bitcoin strategy. History proved Saylor right: MicroStrategy endured an ~80% drawdown, now stronger than ever, while Terra-Luna imploded. Retail investors should heed this lesson and beware Bitcoin affinity scams or “bolt-on” Bitcoin strategies that prioritize flash over substance.
A New Wave of Bitcoin Treasury Companies
Today’s Bitcoin Treasury Companies are seizing geographically unique opportunities to raise capital through equity and debt offerings, securitizing Bitcoin for markets that can’t or won’t buy it directly. Unlike Terra-Luna’s shaky foundation, these firms operate on firmer ground. Metaplanet, for instance, recently slashed its debt, achieving a leverage ratio of <1% and the ability to weather a 99% Bitcoin price drawdown on a stack of 12,345 BTC.
Today, Strategy remains 5.5x over-collateralized with a stockpile of 592,345 BTC. By contrast, there isn't a single investment grade company in the United States that is overcollateralized by even 3:1 - a stronger collateral position than any borrower that is rated by any credit agency in the United States. These companies use prudent, manageable debt with favorable terms and negligible liquidation risk (so far). Corporations can do things individuals cannot, leveraging unique tax, equity, and debt abilities to generate a market premium, amplified by jurisdictional nuances. This dynamic reflects a globally distributed “Speculative Attack,” as Pierre Rochard prophetically described in his 2014 article, where capital flees weak currencies for hard money. Not all are Metaplanet, but writing them off as doomed ignores the evidence. As publicly traded entities, they disclose actions in filings and share metrics for shareholders to scrutinize. It’s not always easy for retail investors to parse, but the information is there. How long can the trend last? Only $2T | 18,334,831 BTC into a $500T | 4,583,707,669 BTC+ opportunity, the answer may be “a while.” Undoubtedly, as it becomes more difficult for individuals to sort through filings from thousands of Bitcoin Treasury Companies, an entire new industry of Bitcoin-native financial analysts, index ETFs, consultants, and advisors will sprout up to distill the information into insights. Separating objective, unbiased analysis from paid promotions will always be a challenge for the layman.
The Lending Risk and TradFi’s Shadow
Unlike DeFi’s contagion, these companies’ business models largely avoid lending, which amplified past failures. Lending paired with leverage is a toxic mix. MARA, a Bitcoin miner, is an exception, drawing a small revenue stream from Bitcoin lending to augment mining’s harsh economics. This trend warrants close monitoring, as lending can spiral in downturns. A larger threat may actually come from TradFi banks, now entering Bitcoin custody and trading. Rooted in fractional reserve banking and rehypothecation, Banks may think they’re smarter than Bitcoin, risking reckless monetization. Their overconfidence could spark future price drawdowns, echoing DeFi’s missteps, if they fail to learn the lessons of the past. This may be a far more likely source of market contagion than pure-play Bitcoin accumulation vehicles.
What Companies and Individuals Can Do
Companies must build anti-fragile businesses. The market will probe weaknesses to snag Bitcoin at a discount. Stress-test plans against worst-case scenarios, shun over-leverage, lending, and rehypothecation, and provide transparent data, metrics, and filings. Identify contagion risk and isolate yourself from it. Over-communicate strategy, follow through, and stay humble—nothing truly “outperforms” Bitcoin.
Individuals should resist FOMO and know what they’re buying. Bitcoin in self-custody is the only way to fully reap its benefits. Understand that you are seeking price appreciation above Bitcoin in fiat terms, because you have the benefit of information asymmetry at a time when fiat is still a socially acceptable money. If you take on counterparty risk, dig into the data. Assess companies’ transparency, leadership, financial health, and resilience, not just their Bitcoin narrative. Call out and shame obvious scams, orange washing, and pump-and-dumps. If you don't have the time or resources to perform due diligence, you have the choice between gambling and stacking real sats.
Conclusion
Bitcoin Treasury Companies aren’t the crypto scams of yesteryear, but they’re not all cut from the same cloth. Terra-Luna’s collapse laid bare the perils of flawed models and DeFi’s excesses, while today’s firms use prudent debt and transparent filings to raise capital. Risks—counterparty exposure, execution, lending, and TradFi’s influence—demand caution. Companies must fortify their models; individuals must prioritize self-custody and due diligence. Judge each company against the benchmark of Bitcoin in cold storage, and approach this trend with clear-eyed scrutiny. Your choice is your own and this is not financial advice.
O21 Solutions
Our mission at O21 Solutions is to guide public and private energy companies to develop and implement holistic Bitcoin-based business strategies—spanning treasury and operations—that align with their culture and long-term vision. We believe Bitcoin adoption is a requirement to stay competitive in the future, and an enabler for societal energy abundance and value-added products and services - a global megatrend we call the Money Transition. We want to integrate digital capital with the global energy system across the full Bitcoin stack - network, protocol, asset, money. Treasury strategies and financial services are a part of the solution, but are not the sole focus of corporate Bitcoin adoption.
Companies ready to act can partner with O21 Solutions to navigate the Money Transition and develop a tailored Bitcoin strategy. Our expertise enables us to help companies assess their unique capabilities, competencies, and needs relative to Bitcoin, creating and implementing a strategy to ‘get off zero.’ This approach is customized to each company’s long-term strategic objectives, whether adopting Bitcoin as a treasury asset, integrating it into operations, or incorporating it into service offerings.
Mathieu Agee, Founder, O21 Solutions LLC
