From hedge to hazard: Bitcoin stressing corporate balance sheets

Warnings about bitcoin excess are hardly new, but when they come from Michael Burry, markets tend to pay closer attention.

The investor famed for anticipating the US subprime mortgage collapse has issued a stark caution: bitcoin’s structure, and the way it is now embedded in corporate balance sheets, risks turning any sharp downturn into a self-reinforcing spiral.

A downturn that feeds on itself

Bitcoin’s recent slide has been material.

From an all-time high above $126,000 late last year, the asset has fallen close to 40%, returning to levels last seen in late 2024. For Burry, the significance lies less in the headline price move than in the behaviour it can trigger.

Nearly 200 publicly listed companies now hold meaningful bitcoin positions. Many did so not as short-term trades but as part of long-term treasury strategies.

In a prolonged decline, however, boards and risk committees may be compelled to recommend sales to preserve capital or remain within risk limits.

Those disposals, disclosed through financial reporting, add further selling pressure, reinforcing the downturn they were meant to mitigate.

Crypto treasuries as leveraged proxies

Burry’s critique is especially pointed when it comes to so-called crypto treasury companies.

Firms whose equity story is tightly bound to bitcoin — most prominently Strategy — can behave like leveraged exchange-traded funds in all but name.

A 10% move in bitcoin can translate into far steeper swings in share prices.

That volatility rarely stays contained.

Sharp equity declines can weigh on broader market sentiment, particularly among technology and speculative growth stocks, creating a channel through which crypto stress spills into traditional markets.

From digital gold to high-beta risk

Bitcoin’s rise was built on a compelling narrative: a scarce, decentralised hedge against fiat debasement. In practice, that promise has proved elusive.

During periods of inflation anxiety or tighter monetary policy, bitcoin has tended to trade less like gold and more like a high-beta risk asset, rising with abundant liquidity and falling as conditions tighten.

For corporate treasuries, this has been an uncomfortable discovery. Rather than diversifying risk, bitcoin exposure has often amplified it.

Accounting rules compound the issue, forcing impairments when prices fall while preventing equivalent mark-ups on recovery, locking in asymmetrical pain even for long-term holders.

Miners, leverage and reflexivity

Burry’s more provocative point concerns reflexivity. Falling prices alter behaviour in ways that make recovery harder.

As bitcoin declines, miners’ margins compress. Many are highly leveraged and must sell more of the bitcoin they produce to remain solvent, adding supply into a weakening market.

At the same time, lower prices erode collateral backing crypto-linked loans, increasing the risk of forced liquidations.

Each mechanism feeds the next, accelerating stress rather than absorbing it.

A sober lesson for finance leaders

“Bitcoin to zero” is a dramatic phrase, but the practical lesson is more nuanced. Assets do not need to collapse entirely to cause lasting damage.

For CFOs and boards, bitcoin should be modelled less as a visionary hedge and more as a volatile risk asset with unique feedback loops — one capable of magnifying stress precisely when balance sheets can least afford it.