Bitcoin Treasury Companies: A Lesson in Leverage

The period between 2024 and 2026 saw approximately 200 public companies begin buying Bitcoin to hold on their balance sheets. With Bitcoin peaking at around USD 126,000 in late 2025 and falling by more than 50% in 2026, all Bitcoin treasury companies (BTCTCs) declined too, but not to the same degree. As the media used the term ‘leverage’ to describe all of them, the general discussion of the consequences of the market drawdown often failed to distinguish between these companies, even though the ways in which they have been affected are structurally different and have significant implications for investors’ risk assessments.

Some BTCTCs had to face their lenders and comply with the contractual terms of loans taken out to finance the acquisition of Bitcoin as a treasury asset. Others lost their ability to raise capital on favorable terms. Describing them all as leveraged placed them in the same category, even though not all of them were borrowing.

Bitcoin as Collateral

Posting Bitcoin as collateral means losing the practical freedom to use it. It ceases to function fully as a treasury reserve asset and instead becomes subject to the constraints of the loan. The treasury reserve policy is suddenly restricted by the terms of the loan agreement.

One example is Nakamoto Holdings, which borrowed USD 210 million. With Bitcoin recently losing around half its dollar value, the collateral was no longer sufficient, and the firm was required to add another 688 Bitcoins to meet the loan requirements. This increased the collateral to roughly 4,405 Bitcoins. When that was still insufficient, Nakamoto Holdings decided to sell a further 600 Bitcoins and partially repay the loan, reducing it to USD 165 million.

Another BTCTC, Empery Digital, was left with a much tighter liquidation trigger. If its collateral fell below 143%, the lender could sell the collateral without prior notice and the time to provide additional collateral was reduced to 12 hours.

It is important to note that these BTCTCs avoided actual liquidation by their lenders. When leverage involves borrowing, moving first is essential. They were all able to react quickly, increase their collateral, sell coins on their own terms, and repay all or part of their loans early. Renegotiating loan terms may also remain an option for BTCTCs. However, when the value of the underlying asset is falling quickly, time is of the essence.

The Premium Is Not a Loan

The same label of ‘leveraged’ was widely applied to all BTCTCs, even though some operated very differently. The relevant measure here is mNAV, which compares a firm’s market value with the value of the Bitcoin held on its balance sheet. When the company is worth more than its Bitcoin treasury, mNAV rises above 1.0, creating a premium.

Issuing new shares at these mNAV levels allows firms to raise more dollars than the value of the Bitcoin represented by those shares, enabling BTCTC to capture the premium. The market has referred to this as accretive dilution with amplified returns, and it can certainly resemble borrowing in its economic effects, even though it is not debt. This approach has been largely popularized by Strategy (formerly MicroStrategy), whose chairman, Michael Saylor, is one of the most prominent voices in the Bitcoin industry.

Equity is permanent capital, not a loan. The falling price of Bitcoin reversed the premium, and this capital-raising mechanism became less effective. Stock prices followed Bitcoin even more aggressively, as the amplification works in both directions. Depending on when they acquired their shares, many shareholders are now facing significant paper losses. However, the company itself does not face liquidation as a result of loan-contract terms.

Drawdown Reveals the Difference

In a bull market, everybody is a winner and the two approaches can appear indistinguishable. Strong gains attract the same groups of investors. A sustained period of decline in the underlying asset’s price, however, clearly shows where the differences lie. Borrowers face deadlines and the threat of loan liquidation, while firms relying on premiums face the disappearance of those premiums. Investors may be disappointed in both cases because of the losses they face, but the risk remains significantly higher for BTCTCs that financed their Bitcoin purchases with loans.

Market sentiment changed, and Strategy experienced this too. Saylor’s model was among the least fragile, but Strategy has nevertheless spent the past few months rebuilding a dollar reserve amounting to USD 4 billion, selling a small portion of roughly 840,000 Bitcoins it holds, and buying back its Stretch preferred shares (STRC) after they fell below par. Most of the reserve was raised by selling new MSTR shares rather than Bitcoins. Shareholders were diluted, but the treasury stayed largely intact, which is the flexibility the equity model is designed to preserve. The company built its brand around the claim that it would ‘never sell’, yet it has gradually adapted its operations towards preserving capital and ensuring coverage of STRC dividends.

Strive has adopted a similar approach, using its SATA preferred shares to finance Bitcoin purchases, while maintaining an even cleaner balance sheet than Strategy. Preferred shares such as STRC and SATA distinguish Strategy and Strive from more heavily indebted BTCTCs, allowing them to raise capital while avoiding liquidation risk and leaving them primarily with dividend obligations.

The Distinction That Matters

The premium is not debt leverage, although it can economically amplify exposure to Bitcoin. It may be tempting to place premiums and loans in the same category, but doing so would obscure an important distinction. The bull-market years created success stories that encouraged some firms to add real debt on top of Bitcoin price risk and treat the two as though they were equivalent.

During Bitcoin’s decline from its all-time high to its current price, even the more resilient BTCTC model employed by Strategy has had to adapt, although without facing forced liquidation or lender-imposed deadlines.

Investors holding Bitcoin directly, ideally in self-custody, still have the simplest path ahead. Without leverage, a fall in Bitcoin’s price affects them directly, rather than being amplified by additional financial obligations. What 2026 has revealed is the important distinction between premiums and loans, while demonstrating that not every BTCTC structure is equally fragile.

Companies that have limited hard leverage have not avoided drawdowns, but their balance sheets have remained more flexible, giving them more room to adapt their models as the wider market anticipates the beginning of the next cycle.

Where the investor is based matters as well. Shares in a BTCTC are held through a broker in the market where the company is listed, and a foreign shareholder can face that market’s withholding taxes, estate rules, and account restrictions after moving countries. Bitcoins held directly move with their owner and follow the owner’s tax residence, which wealthy holders increasingly choose through residence and citizenship planning.