A looming $12.8 billion debt maturity wall could threaten the sustainability of major Bitcoin Treasury Companies (BTC-TCs) like Marathon Digital and Nakamoto by 2028.

This is according to a new Keyrock report showing that while such firms collectively hold more than 725,000 BTC, their reliance on capital markets and negative cash flows for acquisitions has made them vulnerable to weakening Bitcoin prices and souring investor sentiment.

The Debt-Fueled Accumulation Boom

BTC-TCs, public companies using debt and equity to amass Bitcoin as a primary treasury asset, have exploded since Strategy pioneered the model in 2020. The Michael Saylor-led business intelligence provider now dominates the sector, holding no fewer than 597,000 BTC, or 82% of the cohort total, valued at about $67 billion at current rates.

So far, the steadily growing industry has raised more than $3.35 billion in preferred equity and approximately $9.48 billion in debt, alongside substantial common stock sales to fuel their BTC buying spree. According to Keyrock, this capital structure has created a significant refinancing risk: $12.8 billion in debt maturities, heavily clustered in 2027 and 2028.

While convertible notes, such as Strategy’s $7.3 billion in 0% issuance, have become popular and offer potential equity conversion relief, they hinge on sustained high stock prices. This means that if prices fall below conversion thresholds, it could force the BTC-TCs to sell portions of their holdings or resort to distress refinancing, which could trigger downward spirals.

Newer entrants like Twenty One Capital and Tokyo-listed Metaplanet are trying to prevent such scenarios by employing varied strategies, including leveraging Japan’s zero rates and getting into SPAC mergers. That being said, Keyrock’s analysis shows that the core reliance on favorable market access remains pervasive across the sector.

Sustainability Hinges on Fragile Premiums and Cash Flow

Per the report, Bitcoin-focused businesses face two major risks: the cost of paying off their debts and how long they can keep operating without running out of money.

Despite this, investors are willing to pay 73% more than the actual value of the BTC these companies hold. They justify this using Strategy as a case study. The firm has boosted its Bitcoin-per-share by about 63.6% each year, thanks to smart fundraising during bull markets that helped it buy more Bitcoin without hurting shareholders.

However, according to Keyrock, there’s a big difference in how much cash these firms make. For instance, it says companies like Strategy and Marathon Digital are losing a lot of money from their day-to-day operations, about $78.3 million and $43.5 million each quarter. To stay afloat, they rely entirely on selling new shares at high prices. Nakamoto is in a similar position.

Meanwhile, outfits like Metaplanet, Semler Scientific, and CoinShares are doing better. They either make a profit each quarter or have enough cash saved up, which helps them handle costs without needing to sell shares or dip into their BTC stash.

Now, suppose BTC prices drop, or the hoarding strategy fails, and the market stops valuing these companies far above the actual worth of their holdings. In that case, Keyrock analysts claim that Marathon and Nakamoto could run into trouble, forcing them to sell Bitcoin or issue lots of new shares every quarter, which could reduce the value for existing investors.

Strategy is also exposed to this risk, but it’s in a stronger position because it’s bigger and investors trust it more.