Bit Digital CEO "Leverage could destroy crypto treasury firms"

Claims have emerged that crypto treasury companies (DAT) that use leverage could collapse in a bear market.

On the 1st (local time), The Block reported that Sam Tabar, CEO of Bit Digital, said, "The easiest way to secure more cryptocurrency per share is to use debt," adding, "But leverage used in the wrong way can very easily destroy a company."

He especially emphasized, "Many Ethereum (ETH) treasury companies have issued collateralized debt, which is extremely risky," and, "If asset prices fall, creditors will seize companies and assets. Debt is a great tool, but it must be unsecured."

He also warned, "When a bear market comes, creditors of DAT companies that issued collateralized debt will seize the underlying assets, which will destroy numerous Ethereum strategy treasury firms," adding, "This will be a major problem for the industry as a whole."

Tabar's remarks came shortly after Bit Digital announced the issuance of $135 million in convertible bonds. The bonds are unsecured convertible bonds that pay 4% annual interest, and are different in nature from the collateralized bonds issued by DAT companies.

Bit Digital exited its Bitcoin mining business in June to become an Ethereum staking and strategic treasury company, and currently holds approximately 121,252 ETH (about $521,500,000). Tabar explained, "The average purchase price is $2,400, which is very low, and we have been steadily accumulating ETH since 2023."