TechFlow News, May 31: According to the UK’s Financial Times, as prices of crypto assets such as Bitcoin weaken, some crypto treasury firms—whose core business is holding crypto assets—have begun pivoting toward a new financing instrument dubbed “Digital Credit” following declines in their stock prices. Under this strategy, firms issue high-yield perpetual preferred shares to investors, with proceeds used to continue purchasing Bitcoin. Since its launch approximately 10 months ago, this model has attracted roughly $10.5 billion in inflows. Several crypto reserve companies are now planning to adopt this approach, including Strive Asset Management, The Smarter Web Company, and Capital B.
However, market participants are raising concerns about the sustainability of this model. Because dividends on the preferred shares rely primarily on continuous fundraising—not operating cash flow—some analysts question its long-term viability. Meanwhile, investor enthusiasm for the crypto reserve concept has cooled; share prices of several related firms have plunged significantly from their peaks, and some companies have even been forced to sell off crypto assets and refocus on their original core businesses.
