It seems like a long time ago now, but on August 11, 2020, Bitcoin became a treasury reserve asset for the first publicly traded company in the US. Very few, if any, of us knew who MSTR or Saylor was at the time, but nevertheless, the company made history by announcing the purchase of 21,454 Bitcoins for approximately $250 million.
It was proof that Bitcoin had graduated from a pleb only asset class.
Fast forward 6 years, and Bitcoin is still the same old blockchain and UTXOs, but MicroStrategy, now Strategy and all the carbon copies that followed have become something completely different.
What started out as a way to protect your company’s cash balances from inflation risk has morphed into something completely different, a sort of frakenfinance stacked with new layers of complexity. The initial pitch made sense: Run your company in its niche, remain cash-flow positive, and convert your retained earnings into Bitcoin and stack it on your balance sheet.
Investors could remain positive about your strong cash flows and reliable business operations and, as a bonus, gain exposure to the growing Bitcoin reserves.
But stacking sats through operations only is slow and boring, and markets wanted more.
First, it was issuing debt to buy Bitcoin
Then it was issuing additional shares to buy Bitcoin
Then by early 2026, Bitcoin treasury companies had created a sophisticated ecosystem of credit products promising to turn volatile Bitcoin holdings into a stable yield. The pitch still remains: own Bitcoin exposure, but has now added another aspect: earn passive income and sleep soundly.
The reality is far more dangerous.
These products layer leverage, dilution, counterparty risk, and corporate debt into a system that obscures Bitcoin’s fundamental value proposition—peer-to-peer digital cash that requires no trust in intermediaries. For the vast majority of individual retail investors, these products represent unnecessary complexity, hidden costs, and unfamiliar risks. And yet, for a very specific and narrow use case, they might actually serve a legitimate purpose.
Bitcoin treasury company credit products might work for Wall Street in some portfolio mix, but for the average pleb, they pose unacceptable risk to retail investors.
The Current Landscape: $10 Billion in Digital Credit
The numbers are staggering.
We might not think of it that way, given the massive valuations we’re seeing in the AI space, which are minting new trillion-dollar companies each month, but don’t let those outliers make these numbers look any more reasonable.
Strategy (formerly MicroStrategy) alone holds 846,842 Bitcoin— 4% of all Bitcoin that will ever exist—acquired for roughly $64 billion. The company has issued $12 billion in preferred equity and $6.7 billion in convertible debt to fund continued accumulation.
Digital credit instruments from five major treasury firms are projected to distribute approximately $435 million in dividends by the end of Q1 2026.
And executives claim this represents only the beginning of a multi-trillion-dollar opportunity.
This is where the analysis must stop and ask the critical question:
- If Bitcoin doesn’t have any yield itself, how can you consistently harvest enough volatility to pay dividends?
- If Bitcoin itself is supposed to be the solution to financial intermediation, why are we creating new financial intermediaries to distribute its value?
The Fundamental Problem: Unnecessary Complexity and Hidden Leverage
Individual investors who want exposure to Bitcoin can buy Bitcoin directly. The process is simple: open an exchange account or visit a P2P Platform, purchase Bitcoin, transfer it to a self-custody wallet (hardware or software), and you own it.
No intermediaries.
No counterparty risk.
No corporate balance sheets involved.
You have direct, irrevocable control of your asset.
Bitcoin treasury company credit products obscure this reality by adding layers of complexity. Instead of holding Bitcoin, you hold a debt instrument issued by a corporation that holds Bitcoin.
Now you have digital credit, as they like to call it in the marketing and various podcasts, pitching these products.
So what do you receive in return for accepting all this risk?
A yield of perhaps 3-7% or even 11 – 13%, paid in dollars or through share appreciation. You are taking Bitcoin volatility risk—including the possibility of losses exceeding 50% in a sustained bear market—to receive fixed income.
This is backwards.
It is taking tail-risk exposure for modest expected returns.
The NAV Premium Problem: Why the Math Doesn’t Work
One of the most dangerous aspects of Bitcoin treasury company credit products is the NAV premium phenomenon. Strategy has traded at premiums of 1.8x to 2.0x net asset value. This means the market is paying $1.80 for every $1.00 of Bitcoin on the company’s balance sheet.
Why does this premium exist?
Several reasons: speculation that Bitcoin prices will rise, institutional demand for leveraged Bitcoin exposure, and tax-advantaged structuring for certain investors. But critically, the premium exists only as long as sentiment remains bullish.
In a Bitcoin correction, this premium compresses with brutal speed as trading bots adjust bidding.
If Bitcoin falls 20%, Strategy has historically fallen 30-40% due to NAV compression combined with leverage amplification.
A 50% Bitcoin decline might produce an 80%+ decline in Strategy’s stock price.
For investors holding these credit products—bonds, preferred shares, digital credit instruments—a NAV compression isn’t purely a price decline.
It signals financial stress.
The company’s equity base erodes. Debt servicing capacity declines. Credit ratings come under pressure. What was supposed to be a stable income stream suddenly looks risky.
In contrast, if you hold Bitcoin directly and Bitcoin falls 50%, you have “lost” 50%.
This is clean and clear.
You know exactly what you own. No surprises. No hidden leverage amplification. No counterparty concerns.
The Yield Illusion: Earning Dollars While Taking Bitcoin Risk
Bitcoin treasury companies market their credit products on the promise of yield. A 3-5% annual return sounds attractive to investors accustomed to near-zero interest rates. But the yield is paid in dollars—a currency that is slowly devaluing while Bitcoin appreciates. This creates a fundamental mismatch.
Imagine a simplified scenario: Bitcoin appreciates 20% per year (its historical average). A digital credit product paying 5% yield means you are receiving 5% in dollar returns while exposing yourself to 20% Bitcoin appreciation risk. You are being paid 5 cents for the privilege of taking on 20 cents of volatility. The risk-return profile is inverted.
If your goal is Bitcoin exposure, you should want the full upside. If your goal is income, you should use dollars that maintain value. Mixing the two is a compromise on both fronts.
Moreover, the yield is contingent on the company’s solvency and willingness to pay. If financial stress emerges, dividend cuts or payment suspensions are likely. Bitcoin’s ownership, by contrast, is unconditional. Your coins belong to you, irrespective of external conditions. You receive 100% of the upside and 100% of the downside—nothing more, nothing less.
The Rare Exception: When Treasury Company Exposure Makes Sense
Having established that Bitcoin treasury company credit products are inappropriate for most investors, there is one possible use case that deserves consideration. It is narrow and specific, applying to some retail investors.
But for those it applies to, these products are actually one of the few available options.
The exception: You have significant cash in a self-directed retirement account (401k, IRA, etc.), and the account custodian does not permit direct Bitcoin ownership due to regulatory restrictions. In some cases, you can allocate to a Bitcoin spot ETF, but not always.
Many self-directed account custodians strictly limit holdings to traditional securities: stocks, bonds, funds, and similar instruments. Bitcoin is often prohibited. If you have accumulated substantial capital in such an account and want Bitcoin exposure without abandoning the tax-advantaged status of the account, you face limited options.
In this scenario, holding publicly traded Bitcoin treasury company stock (not their credit products, but the equity itself) might be the only way to achieve Bitcoin exposure within the account’s constraints.
The equity is a tradable security.
It provides Bitcoin correlation.
It’s better than holding cash or traditional bonds earning near-zero yield. And if the account custodian eventually permits direct Bitcoin ownership, you could liquidate the position and migrate.
But there is a critical caveat: this option should only be considered if the company in question generates substantial cash flow from an unrelated business line and uses Bitcoin purely as a treasury reserve asset.
The Secondary Exception: Unrelated Cash Flow Plus Bitcoin Treasury
If we must identify companies where Bitcoin treasury holdings make sense—not as a speculation or leverage play, but as genuine treasury management—the model is very specific:
- The company generates substantial recurring cash flow from an actual business.
- The business is not related to Bitcoin, cryptocurrencies, or financial services.
- Instead of maintaining cash reserves in low-yield debt instruments or savings accounts, the company strategically deploys some cash into Bitcoin—not on leverage, but as a direct allocation.
- The Bitcoin holding is a treasury asset, not the business model itself.
This model is fundamentally different from Strategy or other dedicated Bitcoin treasury companies. A traditional operating company that happens to hold Bitcoin is making a statement about capital allocation, not financial engineering. The Bitcoin position is secondary to the core business.
For investors in such companies—buying stock based on the underlying business and receiving Bitcoin exposure as a bonus—this can be legitimate. The equity valuation is driven by business fundamentals. Bitcoin ownership is a hedge and capital-allocation choice. If the Bitcoin position goes to zero, the company remains solvent due to its operating cash flow.
Contrast this with Strategy: the company has no material business. It exists solely to accumulate Bitcoin using leverage and equity issuance. There is no operational cash flow to provide a safety net. The entire enterprise is a leveraged bet on Bitcoin prices.
Why Buy the Derivative When You Can Own the Underlying?
The most powerful argument against Bitcoin treasury company credit products is simple: financial derivatives exist to provide exposure to underlying assets that are otherwise inaccessible. Currency futures exist because retail investors can’t easily trade foreign exchange. Oil futures exist because owning physical oil is impractical. These derivatives serve a genuine need.
Bitcoin is different.
It is infinitely divisible, instantly tradable, and accessible to anyone with internet access. The custody problem—’ where do I store my Bitcoin safely?’—has been solved through multiple channels: hardware wallets, institutional custodians, and reputable software wallets.
The fact that individuals can easily and safely hold Bitcoin directly makes derivatives and credit products unnecessary for most use cases. These instruments don’t provide access to something unavailable. They provide access to something accessible—but with higher costs, leverage, and counterparty risk.
Bitcoin treasury company credit products exist primarily to serve two constituencies:
- (1) institutional investors who are legally prohibited from direct cryptocurrency holdings, and
- (2) retail investors willing to accept leverage and financial intermediation in exchange for perceived simplicity or yield.
Neither constituency has good reasons to accept these trade-offs.
The Systemic Risk Problem
A final critical point: Bitcoin treasury companies with massive leverage and interconnected financing structures create systemic risk within the broader financial system. Strategy’s 800 000+ Bitcoin position represents such a large concentration that its distress could impact Bitcoin prices themselves.
Margin calls on leveraged Bitcoin-backed loans could trigger forced selling. Debt refinancing pressures could force liquidations.
Individual investors participating in these credit products are not just taking on counterparty risk.
They are supporting a financial system where the failure of one actor could trigger cascading consequences. This is the opposite of what Bitcoin was designed to solve.
Simple Beats Complex
Bitcoin treasury company credit products are sophisticated financial instruments designed to monetise leverage, corporate debt issuance, and financial engineering. For most investors, they represent an unnecessary layer of complexity, hidden costs, and amplified risk.
The case for individual investor participation is weak. Direct Bitcoin ownership is simpler, cheaper, more transparent, and removes counterparty risk. If your goal is Bitcoin exposure, buy Bitcoin. If your goal is yield, recognise that taking Bitcoin volatility risk to earn a 3-5% yield is an unfavourable trade-off.
The narrow exceptions—self-directed accounts with custody restrictions, or companies using Bitcoin as treasury reserves while generating substantial unrelated cash flow—are real but uncommon. For the vast majority of investors, the optimal Bitcoin strategy remains unchanged: self-custody of coins, bought directly, held long-term.
No leverage.
No intermediaries.
No credit products.
Just Bitcoin.
