Bitcoin Treasuries, Digital Credit, and the Coming Shakeout

Summary

The December 10, 2025 episode of What Bitcoin Did features Jeff Walton explaining how Bitcoin treasury companies are evolving from simple “sell equity, buy Bitcoin” strategies into complex, yield-bearing balance sheets. Walton outlines how scale enables access to perpetual preferred equity, Bitcoin-backed lending, and discounted acquisitions, while also introducing new leverage, liquidity, and valuation risks. The conversation positions these treasuries as volatility absorbers and key conduits into a growing Bitcoin-native digital credit market that could shape institutional and eventually sovereign adoption.

Take-Home Messages

1. Treasury model evolution: Early “sell equity, buy Bitcoin” strategies are giving way to integrated models that combine operating businesses, cash-flow, and yield generation on top of Bitcoin reserves.
2. Scale unlocks digital credit: Larger Bitcoin treasuries can issue high-coupon perpetual preferred equity and other Bitcoin-backed credit instruments that smaller firms cannot access on comparable terms.
3. NAV discounts cut both ways: Sub-1x net asset value pricing can signal distress yet also enables accretive mergers and acquisitions where stronger managers buy Bitcoin at a discount via stock deals.
4. Risk management is decisive: The durability of perpetual coupons and leveraged structures depends on disciplined use of cash buffers, derivatives, operating income, and limited tactical Bitcoin sales through drawdowns.
5. Treasuries as market conduits: Bitcoin treasury companies increasingly act as volatility absorbers and transmission channels between spot Bitcoin, equity markets, and a nascent multi-trillion-dollar digital credit system.

Overview

Jeff Walton argues that the first generation of Bitcoin treasury companies, built on raising equity to buy and hold Bitcoin, is no longer sufficient in a more competitive environment. Instead, he contends that resilient treasuries must pair their Bitcoin with operating businesses, cash-flow generation, and yield strategies that can support the balance sheet through full market cycles. This shift repositions Bitcoin from a passive reserve asset into the core collateral for a broader financial and operating platform.

Using Strive’s balance sheet as an example, Walton explains how reaching several thousand Bitcoin opened access to roughly $200 million of perpetual preferred equity paying a 12% coupon. He presents this as a form of Bitcoin-native digital credit that allows investors to earn income-linked exposure while providing the company with long-dated, non-amortizing capital. Walton notes that this scale advantage creates a structural divide between larger treasuries that can tap institutional credit markets and smaller firms that remain constrained to basic equity issuance.

The conversation then turns to consolidation, valuation, and the mechanics of buying Bitcoin at a discount via mergers and acquisitions. Walton describes how Strive’s all-stock acquisition of Similar effectively used its equity premium to acquire Bitcoin below spot, while acknowledging that many treasury companies trade under 1x net asset value. He insists that a discount alone does not doom these firms, arguing that management quality, deal discipline, and the ability to deploy Bitcoin into productive opportunities will determine who survives the coming shakeout.

Risk management anchors the discussion, especially around whether perpetual preferred equity and other leveraged structures can be serviced in deep drawdowns. Walton characterizes shares of treasuries such as Strategy and Strive as “volatility absorbers” that can sell off far more than Bitcoin itself, even as underlying reserves grow and leverage falls. He argues that disciplined use of cash buffers, derivatives like covered calls and basis trades, operating income, and limited tactical Bitcoin sales is essential to avoid forced liquidation when markets turn.

Stakeholder Perspectives

1. Bitcoin treasury companies: Balancing growth ambitions with conservative leverage, risk controls, and acquisition discipline so that Bitcoin-backed capital structures remain sustainable through full cycles.
2. Equity and preferred shareholders: Weighing the appeal of high-coupon perpetual instruments and NAV discounts against concentrated management risk, complex hedging strategies, and potential dilution.
3. Bitcoin-backed lenders and credit platforms: Designing overcollateralized loans and margin call insurance in ways that clearly allocate downside risk and remain robust under extreme volatility and liquidity stress.
4. Regulators and rating agencies: Assessing how perpetual preferred equity, digital credit products, and derivatives-based yield strategies intersect with systemic risk, disclosure requirements, and investor protection mandates.
5. Institutional and sovereign allocators: Evaluating whether Bitcoin treasuries and rated Bitcoin-linked credit instruments can serve as scalable, compliant channels for long-duration exposure without importing hidden fragilities.

Implications and Future Outlook

Walton’s framing suggests that Bitcoin treasuries and Bitcoin-backed credit instruments are becoming key transmission channels between Bitcoin markets and traditional finance. As more firms issue perpetual preferred equity and structured products, the health of these vehicles will matter not just to shareholders but also to lenders, counterparties, and regulators who rely on them as institutional on-ramps. Over the next several years, clearer prudential norms around leverage, collateral quality, and liquidity buffers will likely determine whether this emerging architecture stabilizes or amplifies volatility.

The anticipated “digital gold rush” of the next four to eight years, driven by institutional and potentially sovereign adoption, could harden Bitcoin’s role as macro collateral while shifting where risk actually resides. If large pools of Bitcoin are locked inside corporate treasuries and digital credit structures, stress events may show up first in equity and bond markets rather than in spot Bitcoin itself. This raises policy questions about disclosure, stress testing, and cross-market surveillance as regulators seek to understand how shocks propagate across balance sheets that blend Bitcoin, leverage, and complex derivatives.

Retail and smaller institutional investors will also face a growing menu of Bitcoin-linked exposures that differ significantly in risk profile from holding self-custodied Bitcoin. Treasury equities, perpetual preferreds, and overcollateralized loans all embed management, execution, and counterparty risks that are difficult to evaluate without better education and standardized reporting. How stakeholders resolve these information gaps will influence whether Bitcoin-native finance broadens access and resilience or recreates familiar patterns of opacity and misaligned incentives from legacy credit cycles.

Some Key Information Gaps

1. How can Bitcoin treasury companies design business models that remain sustainable when Bitcoin’s price stagnates or declines for extended periods? Clarifying the mix of operating income, yield strategies, and reserves needed for resilience will help firms and investors gauge which treasuries can survive prolonged downturns.
2. How should Bitcoin-backed lenders structure margin call insurance products to clearly allocate downside risk between borrowers, lenders, and capacity providers? Transparent risk-sharing mechanisms are essential to prevent hidden leverage and cascading failures in emerging Bitcoin credit markets.
3. What leverage thresholds and diversification strategies allow treasury companies to honor perpetual preferred dividends without resorting to distressed Bitcoin sales? Identifying prudent limits would guide issuers, rating agencies, and regulators in judging whether current capital structures are robust or overly aggressive.
4. What stress-testing frameworks are needed to evaluate the resilience of overcollateralized Bitcoin loan books under sharp price shocks and liquidity squeezes? Purpose-built stress tests would help lenders and supervisors calibrate margin requirements, haircuts, and liquidity buffers for Bitcoin-linked credit.
5. What empirical indicators would validate or falsify projections of 30–50% annual Bitcoin growth over the next four to eight years driven by institutional and sovereign adoption? Tracking measurable signals of adoption and market depth will anchor planning, preventing both overconfidence and unnecessary pessimism in strategic decisions.

Broader Implications for Bitcoin

Bitcoin-Native Corporate Finance Architecture

Bitcoin’s emergence as core collateral for treasury companies and digital credit instruments points toward a distinct corporate finance architecture built around scarce, programmable money. Over the next decade, firms that natively structure their balance sheets around Bitcoin may influence norms in capital structure design, covenant packages, and risk-sharing between equity, preferred holders, and lenders. This evolution could pressure traditional issuers to compete on transparency and balance sheet discipline, as investors benchmark fiat-only capital structures against Bitcoin-anchored alternatives.

Rewiring Global Credit and Savings Channels

If Bitcoin-backed digital credit grows into a multi-trillion-dollar market, it will offer banks, pensions, insurers, and asset managers new ways to combine long-duration savings with inflation-resistant collateral. Such instruments could gradually redirect savings flows away from some segments of sovereign and corporate bond markets, particularly in jurisdictions with weak monetary or fiscal credibility. This reallocation would reshape how governments and large firms fund themselves, making policy errors and balance sheet fragility more visible in risk premiums demanded by Bitcoin-sensitive investors.

Regulatory Convergence on Digital Collateral Standards

As Bitcoin balance sheets and credit instruments proliferate across jurisdictions, regulators will confront the challenge of harmonizing treatment of digital collateral, leverage, and disclosure. Common standards for valuation, stress testing, and margining will be needed to prevent regulatory arbitrage and to give cross-border institutions confidence that Bitcoin-linked exposures are being supervised consistently. Over a three-to-five-year horizon, these efforts could anchor Bitcoin more firmly inside global prudential frameworks, while also forcing regulators to confront the limits of existing rules designed for purely fiat-denominated assets.