Bitcoin reserve strategy companies are hot: How does massive buying push up the price of the currency and become an unexploded bomb in the market?

In the past half year, the high Bitcoin price has been largely driven by new enterprises focused on leveraging Bitcoin acquisition, known as "Bitcoin Acquisition Vehicles". However, while boosting market sentiment and driving up prices, concerns are growing: "If specific companies control a large amount of Bitcoin, will this impact liquidity and volatility, and potentially undermine Bitcoin's potential as a 'central bank reserve asset'?"

From Financial Strategy to Leverage Fund: MicroStrategy Sparks Bitcoin Investment Trend

Several "Bitcoin Acquisition Vehicles" have recently focused on buying Bitcoin through leverage and financial innovation, making it the core of asset allocation. Since MicroStrategy (now Strategy) massively invested company assets in Bitcoin in 2020, this strategy has attracted many companies to follow suit, including Tesla, Twenty One Capital, GameStop, and even Trump Media.

(CZ Talks About Bitcoin Treasury Companies: Not Taking Risks Is the Biggest Risk!)

GameStop (NYSE ticker: GME) announced the issuance of convertible senior notes totaling $1.75 billion through a private offering to raise a new round of funds. Analysts speculate that the funds from this private offering might be used to purchase BTC as company reserves. However, unlike other companies whose stock prices soared after announcing BTC purchases, GameStop's stock price did not rise but continued to decline.

Convertible senior notes are debt instruments that can be converted into the issuing company's stock and have a higher priority in the company's capital structure. Such notes allow investors to enjoy fixed interest income, but this interest is typically calculated cumulatively and not paid in cash, so the company's debt to investors increases accordingly over time.

GameStop Stock Price Drops Due to First Quarter Performance

GameStop released its Q1 financial report, with net sales of $732.4 million, compared to $881.8 million in the same period last year. The Q1 performance significantly declined compared to the same period last year, and after the financial report was published, GameStop's stock price dropped by 5.31% after hours on June 10.

GameStop Recently Purchased $513 Million in BTC

Although GameStop did not explicitly state that the funds from this issuance would be used to purchase more BTC, the company indicated that the funds would be used for investments aligned with its overall strategy. Recently, GameStop raised $1.5 billion through convertible notes, with part of the funds used to purchase 4,710 BTC on May 28, with a market value of approximately $513 million.

GameStop Uses Priority Notes to Finance BTC Purchase, But Will Investors Buy In?

For listed companies seeking to use BTC as reserves, convertible senior notes are a common leverage tool. According to Bitcoin Treasuries.NET data, GameStop currently holds 4,710 BTC, making it the 13th largest BTC holder. This $1.75 billion private offering has a 0% interest rate, with convertible senior notes maturing on June 15, 2032. The offering includes an option for initial buyers to potentially purchase an additional $250 million in notes that can be converted to cash, GME stock, or both, depending on GameStop's decision.

GME's stock price has continued to decline since its first BTC purchase. According to Google Finance, since GameStop confirmed its BTC purchase on May 28, the stock price has dropped 18.5%. Including the 11.7% after-hours decline, GameStop has erased all gains since first announcing BTC investment as a reserve on March 25. GME's stock trend sharply contrasts with most listed companies whose stock prices rise after announcing or planning to purchase BTC.