- Caitlyn Long, CEO of Custodia Bank, says Bitcoin Treasury Firms have crushed its volatility, which used to be its top selling point.
- Long believes Strategy’s treasury trend of borrowing or leveraging financial instruments to buy Bitcoin only worked for the first few treasury firms to adopt it, but is no longer feasible.
- Senator Lummis suggests the creation of a US Strategic Bitcoin Reserve is closer than ever.
Custodia Bank CEO, Caitlyn Long, stated that the advent of treasury companies stashing away Bitcoin has stifled the volatility of the asset. She noted that the era of volatility, which used to be Bitcoin’s selling point, had ended due to the lopsided strategy of big corporations stacking the asset and pushing out skeptical long-term individual holders.
Many Pioneer Bitcoin Holders Don’t Like Institutional Adoption
In a recent interview on The Wolf Of All Streets Podcast, Long recognized that old Bitcoin holders are giving up their positions more than ever. According to her, the hand off of the asset from these long-term holders to institutional buyers is the reason Bitcoin’s price is not consistent with the level of corporate buying it has experienced.
“Hodlers have awakened,” said Long. And when they do awaken, they tend to do one thing, which is sell them.”
“We are just seeing a hand off from long-term hodlers who bootstrapped this network to the Wall Street…boomer money that is actively trading. But so much of Bitcoin is still held by wallets that have not moved for years.”
By the looks of it, a part of the population of early Bitcoin hodlers (holders) that are pulling their assets are doing so because they now have a ton-load in profits and are not in agreement with the institutionalization and government adoption of Bitcoin.
On the flipside, there is a view that Bitcoin was always bound to pass through different market dynamics and change hands from older holders to a new class of buyers to establish and sustain a new layer of demand.
Long emphasized that the current all-time low in Bitcoin volatility correlates with the massive corporate purchase of Bitcoin, a bubble which had more to do with volatility than with price. Most treasury companies that are presently investing in Bitcoin to leverage its volatility and earn higher returns in the short term could be at a loss, because that strategy no more works.
Newer BTC Treasury Companies To Fund With Operating Cash Flow
In the Bitcoin treasury scheme, Strategy formerly MicroStrategy was the first company to begin buying up Bitcoin in large chunks as a strategic reserve asset, with its holdings now sitting at over 640k BTC (>$77 million). However, the company’s largest funding technique of using convertible debt and leveraging corporate finance tools may be unfeasible for newer Bitcoin treasury firms.
According to Long, a better Bitcoin strategy would deviate from borrowing cheaply and banking on volatility to invest higher. Instead, a “pure play treasury company” will take funds from its operating cash flow and hold them in digital assets like Bitcoin, rather than treasury bills, bank deposits, or money market funds.
Meanwhile, Senator Cynthia Lummis has renewed optimism around the creation of a Strategic Bitcoin Reserve. She has called on the government to begin funding the BTC reserve “anytime soon” using seized Bitcoin and other budget-neutral options.
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