ETH Treasury: Are companies at risk of falling into a debt trap?

Bit Digital CEO Sam Tabar warns that secured loans can become a strain on treasury firms in a bear market. Long-term treasury strategies could be jeopardized if companies are forced to sell their crypto reserves during price declines.
“All these secured bonds will ruin many ETH treasury companies in a bear market. And that will be a real problem. The wrong kind of leverage can very easily ruin a company,” Tabar said.
While secured debt is considered a cheap financing option with lower interest rates, it ties borrowers tightly to their collateral. In practice, this works by a company pledging assets—usually Bitcoin or Ethereum in the crypto sector—as collateral.
If their market value falls, in extreme cases, the position may even be liquidated. In this way, payment defaults can quickly result in the loss of important crypto assets.
Unsecured debt works differently: Here, a company doesn't have to pledge any assets as collateral. This model is riskier for lenders, as they can't directly utilize collateral in the event of a default. Therefore, interest rates are typically higher, and loans are only granted after a rigorous credit check. However, for crypto companies, it means higher ongoing costs.
For treasury companies, the choice between secured and unsecured debt becomes a strategic trade-off: While unsecured loans appear attractive in boom phases, they can become a threat to their existence in times of crisis.

Bit Digital, the former Bitcoin mining company, is currently one of the largest Ethereum treasuries: With 120,310 ETH, valued at approximately $517 million, the company ranks seventh in the global rankings. The company's stock is trading at approximately $3.15, having gained 21.32 percent in one month.
“Currently, our average cost for ETH is around $2,400, which is very low. And we've been buying Ethereum since 2023,” Tabar said.
The second-largest cryptocurrency is currently at $4,300 and has performed particularly well in the second half of the year.

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