Bitcoin treasury
A Bitcoin treasury is Bitcoin held by a company or another organization as a reserve. The term can also refer to the policies for buying, holding, and selling that Bitcoin.
What is a Bitcoin treasury?
An organization can hold Bitcoin alongside cash and other assets. That Bitcoin then makes up part of its financial reserves.
The policies may determine how much Bitcoin the organization wants to hold, who can approve a purchase or sale, and how the Bitcoin is stored. An organization can manage its own private keys or use an external custodian.
A Bitcoin treasury is not a new coin, blockchain, or financial product. It refers only to an organization’s Bitcoin holdings and how it manages them.
An example of a Bitcoin treasury
A company has €1 million available and buys €100,000 worth of Bitcoin. That Bitcoin then becomes part of the company’s reserves.
If the Bitcoin price rises or falls, the value of this part of the reserve changes too. The company does not have more or less Bitcoin, but its value in euros changes.
Why is a Bitcoin treasury important in crypto?
The term appears in news about companies that buy or sell Bitcoin or change their financial strategy. These purchases can increase demand for Bitcoin. Sales, in turn, can add to the supply on the crypto market.
Bitcoin prices can fluctuate sharply. As a result, a reserve can quickly lose value, while an organization still has to pay salaries, taxes, and debts. If you buy Bitcoin with borrowed money, those payment obligations remain even if the price falls.
At a publicly traded company, a large Bitcoin reserve can make the company’s stock price sensitive to the price of Bitcoin. However, owning stock in such a company is not the same as owning Bitcoin yourself. A Bitcoin treasury also offers no guaranteed returns or protection against inflation.
