Risks and Challenges
When Bitcoin dropped 70% in 2022, MicroStrategy's Bitcoin holdings showed a massive unrealized loss, and critics declared the strategy a disaster. Then Bitcoin recovered and made new highs. The lesson: a Bitcoin treasury strategy only works with a long time horizon and strong conviction.
Key risks: price volatility, custody/operational failures, regulatory shifts, accounting uncertainty, and reputational considerations. Risk controls include position sizing, multisig, insurance, audits, and clear policies.
Simple definitions:
- •Operational risk: Process or control failures.
- •Policy risk: Rule changes that affect usage or reporting.
- •Insurance: Coverage for certain custody losses (limits apply).
Risks include price volatility, regulatory changes, custody challenges, accounting complexity, and shareholder pressure during downturns. Companies that adopt Bitcoin treasury strategies need both conviction and a multi-year time horizon.
Test Your Knowledge
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