Bitcoin Treasury Companies, firms that hold billions of dollars in bitcoin on their balance sheets, are crossing over to Europe. This raises the risk that passive investments, via index funds, could be funneled into one of the most volatile corners of the market.
Thomas Costello is blunt in his assessment. According to the chief investment officer of Bedrock Digital Asset Management, the bitcoin proxy model shows clear parallels with earlier bubbles. “Bubble markets always emerge in the same way: people without an information edge believe they can get rich quick,” he told Investment Officer. “That was true during the dot-com boom, with house flipping, and now with Bitcoin Treasury Companies. These firms increase volatility through leverage, without the expertise to properly manage market risk.”
Costello’s warning comes just as Amsterdam is preparing for the first European listing of a Bitcoin Treasury Company. Ambts, a spin-off of Dutch crypto service provider Amdax, is seeking a listing on Euronext Amsterdam. The company aims to build a reserve of 210,000 bitcoins, about 1 percent of the total supply, representing roughly 24 billion dollars at current prices.
The business model is straightforward: raise capital, buy bitcoin, and offer shares as a regulated proxy. Once Ambts becomes large enough for index inclusion, passive funds will have little choice but to hold the stock. That way, bitcoin’s volatility seeps into traditional portfolios.
For investors, the appeal is regulated exposure without wallet hassles
In Costello’s view, the real risk lies not in bitcoin itself but in leverage. “You buy bitcoin, place it with a custodian, and borrow against it. Maybe you start with 1.5 times leverage. Then others push it to 1.6, 1.7, 1.8, and no one thinks about the risk. But two or three bad days with 10 percent swings, and you blow up all of these companies.”
An American invention
Bitcoin Treasury Companies, also known as Digital Asset Treasury Companies (Datcos), typically finance their purchases through equity offerings or convertible bonds. This creates a cycle in which rising bitcoin prices support the stock price, attract new capital, and enable additional purchases.
For investors, the appeal is regulated exposure without the hassle of managing wallets. The downside: company performance depends entirely on the whims of bitcoin.
The model is an American invention, introduced by software firm Strategy, now the world’s largest corporate holder of bitcoin. Under founder Michael Saylor, the Virginia-based company bought more than 600,000 coins worth over 70 billion dollars, largely financed through debt and equity issuance. Its market capitalization jumped from less than 2 billion dollars five years ago to 95 billion dollars today, enough for inclusion in the Nasdaq-100.
Strategy Inc (MSTR)
Inclusion in major benchmarks triggered significant inflows from passive funds. JP Morgan estimates that about one-fifth of Strategy’s shares are now held by index-tracking vehicles, reinforcing a feedback loop in which rising bitcoin prices push the stock higher and attract further benchmark inflows.
Investors pay a premium for this indirect exposure. Strategy’s shares continue to trade well above the value of the underlying holdings.
A European Datco
Lucas Wensing, CEO of Amdax, believes Europe is ready for its own experiment. “Now that more than 10 percent of the bitcoin supply is held by companies, governments, and institutions, we think the time is right to launch a Bitcoin Treasury Company with the goal of securing a listing on Euronext Amsterdam,” he said. With roughly 31 trillion dollars in global corporate reserves, even a modest reallocation toward digital assets could have a meaningful impact on the bitcoin market.
“If companies like Strategy collapsed today, bitcoin would be crushed”
So far, Europe has remained modest. The largest holder is Germany’s Bitcoin Group, which has reported about 3,600 coins. Ambts’ planned reserve would far exceed this, representing both a leap in scale and the first real test for European investors.
“If companies like Strategy collapsed today, it would crush bitcoin and possibly the rest of the crypto market as well,” Costello warned. “I don’t think the impact would be big enough to hit the stock markets, though—they are simply too vast.”
The greater risk, he argues, arises once passive money flows in and these companies enter indices. Bitcoin Treasury Companies amplify volatility without fully understanding the risks, Costello said. “Running a business is one thing, managing market risk is another. Half the people in finance can’t do that, let alone the people setting up these firms. Maybe the S&P committee or ETF managers will draw a line somewhere. But maybe they won’t.”