Breed VC Report: Why the Rush of Corporate Bitcoin Adoption Could Lead to Collapse

Corporate Bitcoin adoption is accelerating rapidly, but there is a growing risk that could wipe out many of these companies. According to venture capital Breed’s report titled The $Strategy Strategy Proliferation, the market is now facing the potential for corporate Bitcoin death spirals that could destroy balance-sheet Bitcoin strategies. While investors continue to pursue the upside, few appear prepared for the structural risks that could quickly push these companies into collapse.

The Death Spiral: How It Happens

Bitcoin’s next chapter is unfolding within the corporate sector. As of May 2025, there are 199 entities holding a total of 3.01 million BTC, valued at approximately $315 billion.Some firms are using Bitcoin to diversify their corporate treasuries, while others are fully dedicated Bitcoin holding companies. The corporate Bitcoin adoption movement is spreading across different sectors, countries, and company types. Many are following the financial playbook established

According to Breed, the biggest risk behind this surge is the corporate Bitcoin death spiral. This is a dangerous cycle that can rapidly destroy these companies if certain market pressures align at the wrong time.

The spiral begins when Bitcoin prices crash. As Bitcoin’s value drops, the company’s stock price typically falls as well. This is often followed by the collapse of the MNAV premium, which is the extra value investors are willing to pay above the company’s net Bitcoin holdings. The MNAV premium reflects investor confidence in management’s ability to grow Bitcoin per share. Without it, the company’s stock trades close to asset value, making it difficult to raise capital through equity.

When these companies have large amounts of debt maturing and cannot refinance, they are forced to sell Bitcoin to meet their debt obligations. Selling Bitcoin at distressed prices further drives the market down. This selling pressure triggers a feedback loop that accelerates the company’s decline. If the cycle continues, bankruptcy or fire sales become inevitable.

Strategy itself survived a serious test during the 2022 to 2023 bear market when Bitcoin lost 80 percent of its value, MNAV premiums collapsed, and capital became difficult to access. The company endured, but this was possible due to its large size, reputation, and passive index inflows. Newer companies will not have the same safety net.

Breed Report: New Bitcoin Firms Face Growing Collapse Risk

Breed’s report emphasizes that new treasury companies are more likely to face accelerated margin calls and distressed Bitcoin sales during a bear market. When these companies are forced to liquidate, their Bitcoin sales can apply additional downward pressure on the overall market. This could trigger further reflexive selling by other over-leveraged firms, amplifying the collapse.

"Most will fail. Fortunately, contagion risk is muted because most financing is equity-based. However, companies that rely heavily on debt pose a greater systemic threat," Breed report said. The report concluded that, in the long run, only a small number of firms are likely to maintain a durable MNAV premium, even as market conditions continue to shift.

The rise of corporate Bitcoin adoption signals a major shift in market dynamics, but as the Breed report highlights, the risks are growing just as quickly. Whether companies can survive the next downturn will depend on their ability to manage debt, protect their MNAV premium, and navigate an increasingly volatile landscape.