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Franklin Templeton Warns of ‘Feedback Loop’ Dangers in Crypto Treasury Space
The digital asset investment management giant has sounded the alarm regarding the potential risks involved with corporations adding cryptocurrencies to their balance sheets.
In a recent statement, Franklin Templeton analysts urged caution over the growing trend of companies adopting Bitcoin and other digital assets as part of their treasury strategy. While acknowledging the benefits of diversification and potentially high returns, they emphasized that this development also poses significant systemic risks.
The main concern revolves around the emergence of a negative feedback loop scenario, which they deemed particularly hazardous. As an increasing number of publicly traded firms opt to raise capital through instruments like equity offerings, convertible notes, and preferred shares to acquire digital assets such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), or Solana (SOL), the danger lies in what happens if the crypto market enters a prolonged downturn.
In such an eventuality, corporations heavily invested in these assets might be compelled to liquidate their holdings to manage debt or comply with investor expectations. This could initiate widespread selling pressure, triggering further price drops and amplifying corporate and investor anxiety.
The self-reinforcing cycle of fear and losses would continue to accelerate as falling prices inspire more sell-offs, thereby fueling the downward spiral.
Source: www.crypto-news-flash.com
