Corporate Crypto Treasuries May Exacerbate Market Downturns: Franklin Templeton Report

A recent report from Franklin Templeton Digital Assets warns that the increasing adoption of crypto treasuries by corporations could intensify market crashes during sharp price declines. Key findings include:

- Over 130 publicly traded companies have incorporated Bitcoin into their balance sheets, raising billions through premium-priced equity and debt offerings
- The strategy poses risks of triggering forced sales when market-to-NAV ratios decline, potentially creating a dangerous downward spiral
- While boosting institutional adoption and corporate valuations in bullish markets, the model's inherent risks could prove destructive during bearish conditions

The report highlights how companies have aggressively accumulated Bitcoin, Ethereum, and Solana assets while leveraging the crypto volatility for capital raising. According to Bitcoin Treasuries data, 135 listed firms have adopted Bitcoin as a reserve asset, with notable adopters including Strategy, Metaplanet, and Sol Strategies.

While acknowledging benefits like NAV-premium fundraising and staking yields for PoS assets, analysts cautioned about dangerous feedback loops. If crypto prices plummet, firms might liquidate holdings to support stock prices, potentially worsening market downturns and investor sentiment.

The warning follows similar concerns from VanEck's digital asset research head Matthew Sigel regarding ATM share issuance programs, and comes amid a class action lawsuit alleging Strategy misrepresented its Bitcoin treasury strategy's risks.

"This corporate treasury model marks an important phase in institutional adoption," Franklin Templeton noted, "but requires careful NAV premium maintenance and volatility management to prevent destructive cycles."