Franklin Templeton Cautions Against ‘Feedback Loop’ Risks in Crypto Treasury Sector

• Analysts at Franklin Templeton Digital Assets have weighed in on the growing trend of corporations adding crypto, especially Bitcoin, to their balance sheets. 
• There’s no denying the benefits of this, such as portfolio diversification and potential for high returns.

Franklin Templeton is a global investment management organization, officially known as Franklin Resources. Over the years, the company has been vocal about the future of cryptocurrencies and is also seeking regulatory approval to launch a new crypto index exchange-traded fund (ETF).

Its analysts have issued a thoughtful warning about the rise of corporate crypto treasuries, a trend that has taken off over the past couple of years.

While the movement presents exciting opportunities for growth, innovation, and returns, the firm’s analysts point out that it also opens the door to serious systemic risks. Chief among those is the threat of a negative feedback loop, a scenario they describe as “particularly dangerous.”

The heart of the concern lies in how more and more publicly traded companies are raising capital through instruments like equity offerings, convertible notes, and preferred shares in order to buy and hold digital assets like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Solana (SOL) on their balance sheets.

Here’s where the danger creeps in: if the crypto market enters a sustained downturn, companies heavily exposed to digital assets may be forced to liquidate their holdings to manage debt or meet investor expectations.

That kind of widespread selling pressure could push prices lower, triggering more sell-offs, a cascading cycle of fear and losses. In this negative feedback loop, falling prices beget more selling, which further drives prices down and intensifies corporate and investor stress.

Also, when a company’s market value slips below its NAV, issuing new equity could actually dilute existing shareholders. That would make it much harder to raise new capital, potentially disrupting growth and breaking the positive cycle the model depends on.

They’ve done this through a mix of financial strategies, at-the-market (ATM) programs, private investments in public equity (PIPEs), preferred shares, and even more complex tools like SPACs and reverse mergers. These approaches offer a wide range of risk-return profiles to investors, but they also come with deeper implications.

“Interestingly, the volatility of crypto assets, often viewed as a risk, is a key enabler of this strategy. Volatility increases the value of embedded options in financial instruments like convertible notes,” they stated.

Bitcoin Accumulation

What began as a bold and unconventional move by Michael Saylor’s Strategy (formerly MicroStrategy) in 2020 has now become a popular blueprint for corporate treasury strategy. According to data from Bitcoin Treasuries, over 135 public companies are now holding Bitcoin, taking cues from Strategy’s early and aggressive adoption.

Franklin Templeton notes that many of these firms have raised billions since early 2024, capitalizing on growing investor interest in digital assets. As we previously reported, Strategy currently leads the pack with an eye-popping 597,325 BTC, followed by MARA Holdings with 49,940 BTC.

One of the most notable recent entrants is Japan’s Metaplanet, which has quickly risen to the fifth spot by securing 13,350 BTC. Backed by a $5 billion capital boost, the company has ambitious plans under its “555 Million Plan,” aiming to hold 30,000 BTC by the end of 2025 and eventually reach 100,000 BTC by 2026.

Metaplanet’s growth has even pushed it past Tesla, which holds 11,509 BTC, highlighting how competitive the corporate Bitcoin accumulation race has become.

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