Franklin Templeton: The future of corporate crypto finance strategies is full of uncertainty, with the risk of "dangerous" feedback loops

PANews reported on July 3 that according to The Block, Franklin Templeton Digital Assets analysts issued a report warning that the future of corporate crypto financial strategies is full of uncertainty and depends on several key factors. Although the model can create upside through premium financing, asset appreciation and pledge income, the negative feedback loop may trigger a "particularly dangerous" downward spiral.

The report points out that 135 listed companies have adopted Bitcoin financial strategies and hold crypto assets through equity, convertible bonds and other instruments. This model relies on the volatility of crypto assets to increase the option value of financial instruments such as convertible bonds, and a positive cycle can be formed when prices rise. However, analysts warn that if the price-to-book ratio falls below 1, equity financing will turn into a dilution effect, and companies may be forced to sell assets to protect the market, which will in turn exacerbate the vicious cycle of falling currency prices and collapsing investor confidence. The report emphasizes that maintaining a price-to-book premium, continuous value-added transactions and the ability to cope with market fluctuations will be the key to the long-term survival of such companies. Analysts believe that although the current risks are more complex than those during the Terra or Three Arrows Capital period, they may still trigger a catastrophic chain reaction if they encounter a major pullback or a long bear market.