bitcoin is one of the best performing assets this
century and it’s basically been going up only over the last decade however as Bitcoin has grown
so too have the stakes a buildup in leverage a concentration of holdings among a few entities and
the threat of a quantum attack are just a few of the risks that could derail this historic rally
and that’s why today we’re going to take a look at some of these top risks to Bitcoin how likely
they are to occur and how they could impact the price if they did my name is Nick and if you
hold Bitcoin this is a video you can’t afford to miss the first risk to Bitcoin is a timeless
classic and that’s a buildup in Bitcoin related leverage and this is something that we’ve seen in
almost every crypto cycle and it looks like it’s a bigger threat this time than ever before now
for context it’s common for Bitcoin holders to use their Bitcoin as collateral to borrow during
bull markets historically speaking this borrowing was mostly limited to institutional investors
however since 2021 Bitcoinbacked loans have become increasingly common both in centralized
finance aka CFI and decentralized finance aka DeFi and here are a few headlines about it that
you may have missed in January this year Coinbase announced it was rolling out USDC loans backed by
Bitcoin in March this year Zapo Bank announced it would be launching Bitcoinbacked loans as well
just last month Strike announced it would also launch Bitcoin collateralized loans with CEO
Jack Marers bragging in an interview that they could give loans of up to $1 billion and just a
couple of weeks ago Canto Fitzgerald announced that it had launched its Bitcoin loan service
with a limit of up to $2 billion to start as a cherry on top a report from Galaxy Digital found
that Tether accounted for nearly 3/4 of the CFI lending market given Tether’s connections
to Strike and Kanto Fitzgerald it’s possible that it’s intertwined with the lending programs
that they’re offering and that’s just on the C5 front on the D5 front over 166,000 Bitcoin are
currently being used in D5 protocols mostly as collateral for borrowing and this is thanks to
the recent launch of more accessible forms of wrapped Bitcoin like Coinbase’s CBTC and this
has resulted in an explosion in DeFi lending using Bitcoin as collateral as we highlighted
in our video about wrapped Bitcoin earlier this year this leverage is likely to be rocket fuel
for the crypto market on the way up including for altcoins consider that a lot of these stable
coins being borrowed against Bitcoin in DeFi are likely to flow into other cryptos on that altcoin
blockchain as we highlighted in that video however this leverage could be dynamite on the way down
as well and history suggests it’s a question of when not if that dynamite’s fuse will be lit
all it would take is some exogenous shock that results in Bitcoin crashing around the margins
and liquidations will begin this time around though the risk is more likely to be found among
retail borrowers than institutional borrowers for example there could be many retail investors who
use their Bitcoin as collateral for loans thanks to its accessibility uh something happens and
all that collateral gets sold pushing Bitcoin’s price down very quickly and this could trigger
liquidations among larger Bitcoin backed loans that were taken on by institutions resulting in a
wave of selling pressure that takes Bitcoin much lower than investors expect there’s honestly no
telling how low Bitcoin could go because analysis tends to break down when there is forced selling
never mind the fact that it’s impossible to know just how much Bitcoin leverage is being taken
in CFI what is known however is that only 34% second risk to Bitcoin and that’s concentration
risk believe it or not but this risk could come from DeFi rather than CFI now for reference we
believe it’s possible that as much as 1 billion Bitcoin could be wrapped by the end of this
cycle now imagine that there was a huge major DeFi hack or exploit this could theoretically
result in billions of dollars of Bitcoin being stolen and sold potentially causing liquidation
in DeFi protocols in the process fortunately this may not be that big of a risk in terms of price
impact just because most of the wrapped Bitcoin that exists is centralized and can easily be
frozen unfortunately the concentration risks in CFI are exponentially bigger risks in terms
of price impact and if you’ve been keeping up with this channel then you might recall a video we
did with Arthur Hayes and Ral Powell last year in that video Arthur warned that the biggest risk
to Bitcoin could be a hack of an inexperienced crypto custodian like a bank for example and
recent changes to bank regulation make this risk a very real one but of course the big name
when it comes to concentration risk is Strategy and other so-called Bitcoin Treasury companies
that have been selling shares and issuing debt to accumulate Bitcoin as some of you may no
doubt have heard Strategy warned in an April 2025 filing with the SEC that it could be forced
to sell its Bitcoin under some circumstances like paying down existing debts and other financial
obligations specifically the filing said quote “A significant decrease in the market value of
our Bitcoin holdings could adversely affect our ability to satisfy our financial obligations.”
and quote “If we were unable to secure equity or debt financing in a timely manner on favorable
terms or at all we may be required to sell Bitcoin to satisfy our financial obligations and we may
be required to make such sales thankfully this does not seem to be a risk for strategy as it
has survived one cryptobear market already and can presumably survive the next one however
the same cannot be said for the other Bitcoin treasury companies and they could be the reason
that strategy is forced to sell during this next downturn many key players in crypto including
Bitcoin bull Max Kaiser and digital currency group CEO Barry Silbert have mentioned this as a risk to
Bitcoin in interviews and it makes sense issuing debt to buy Bitcoin is a form of leverage that
could backfire during a broader market draw down just like borrowing against Bitcoin and if you
watched our video about Bitcoin’s supply crunch you’ll know that public and private companies hold
over 1 million Bitcoin between them although it’s unlikely that all of these companies would be
forced to sell Bitcoin during a downturn if even just a few of them did it could do serious
damage to Bitcoin’s price at the same time it could trigger a wave of liquidations in CFI and
DI as collateral value begins to fall and this relates to the third risk to Bitcoin and that’s
politicization in case you missed the news Trump media recently raised almost $2.5 billion to buy
Bitcoin for its own Bitcoin treasury trump also launched a memecoin an NFT collection a stable
coin and will soon launch a DeFi protocol too in other words it looks like Trump is involved in
literally every aspect of crypto while a lot of scrutiny has been around Trump’s memecoin the
recent Bitcoin treasury could put Bitcoin in the crosshairs for instance uh many politicians
and regulators could start pushing back against the US government’s planned Bitcoin reserve on
the grounds that it directly benefits Trump and his family as you might recall Trump signed
an executive order establishing a strategic Bitcoin reserve back in March and this executive
order not only called for the US government to figure out how much Bitcoin it has and hold it
as a reserve but also to find ways to accumulate more Bitcoin without spending extra money and some
would argue that Trump media’s recent purchase of Bitcoin makes this even less likely than before
on that note the Trump administration’s push to make the US a pro crypto country with Bitcoin as
the focus could backfire internationally as well you might remember that Germany dumped its Bitcoin
on the open market last summer and some argued that its decision to do this instead of sell OTC
was an intentional move to damage Bitcoin but it could also just have been pure incompetence in any
case the point is that the possibility of another country dumping its Bitcoin as a retaliation
against Trump’s foreign policies was already high with Trump’s pro- Bitcoin domestic policies
and it could be even higher now that Trump media holds billions in Bitcoin the elephant in the
room is of course China china is estimated to hold around 200,000 Bitcoin worth over $20
billion not sure if you’ve heard but the US and China aren’t on the best of terms right now
and the trade war is just the tip of the iceberg the Trump administration recently revoked
the visas of Chinese students studying in the United States and is reportedly considering
delisting Chinese stocks among many other things it’s possible that one of the ways that China
retaliates is by dumping its Bitcoin on the open market just like Germany did last summer and FYI
Germany sold around 50,000 BTC and this was one of the many reasons why it fell by 30% last summer
now imagine four times as much Bitcoin being sold on the open market potentially with the explicit
intention of doing as much damage as possible recall how that could trigger liquidations from
our perspective the likelihood of this happening ultimately depends on how Trump’s foreign policy
evolves in the coming months as we’ve seen this is something that’s fundamentally unpredictable
but if you insist on trading this market chaos to Bitcoin follows from the third and that’s the
concentration of Bitcoin mining once upon a time Trump said that he wanted all remaining Bitcoin
to be mined in the US well if the current trends continue he might just get his wish because
US Bitcoin miners are gaining dominance fast publicly traded Bitcoin miners accounted for
almost 30% of the hash rate late last year and chances are that this figure is close to a third
now now for those unfamiliar if an entity were to control more than 50% of Bitcoin’s hash rate then
it could theoretically manipulate the blockchain along with Bitcoin transactions before you roll
your eyes consider that the Biden administration was working to create a registry of all Bitcoin
mining operations in the US logically if the US government knows where all the Bitcoin miners in
the US are then they could theoretically coers them to do whatever it wants as a not so fun
fact Black Rockck could do something similar given its stake in these publicly traded Bitcoin
mining companies combine Black Rockck stake in public Bitcoin mining companies with the fact
that its ETF terms give it the power to decide which Bitcoin fork to follow and you have what
looks like a recipe for a Bitcoin takeover never mind that asset managers were also looking into
who the most influential Bitcoin developers were regardless there’s a less theoretical risk
related to Bitcoin mining concentration that everyone seems to have forgotten about and that’s
the reliance on Chinese-made ASIC mining machines and some of you may have seen the headlines about
Bitcoin miners being unable to get hold of Bitmain AS6 due to Trump’s tariffs if the trade war with
China continues to escalate we could in fact end up with a scenario where Bitcoin mining companies
in the US are unable to expand their operations the good news is that this would reduce the
risk of a hash rate concentration among US-based Bitcoin miners the bad news is that many of these
Bitcoin mining companies have engaged in their own Bitcoin treasury strategies it stands to reason
that a disruption to the supply of ASEX because of tariffs or whatever else would make it harder
for them to raise capital or borrow money and the result could be the exact same thing as what
would happen to Strategy Bitcoin mining companies being forced to sell Bitcoin speaking of which
this possibility although painful for Bitcoin in the short term could be beneficial for Bitcoin in
the long term and that’s because if current trends continue publicly traded Bitcoin mining companies
will continue to account for more and more of the total hash rate and this is due to the factor I
just mentioned their ability to raise capital and borrow money compared to other mining operations
the fifth risk to Bitcoin presents a similarly existential threat and that’s the possibility of a
quantum computer cracking its encryption in theory it will be years if not decades before a quantum
computer is able to do this in practice quantum computing has been evolving at an exponential
rate not only that but it’s easy to forget that the cuttingedge technology we read about on the
news is often months or years behind what’s being worked on behind the scenes by governments and
corporations obviously the bigger that Bitcoin becomes the greater the incentive for institutions
who are threatened by Bitcoin to do something like quantum attack it to slow it down be they
governments or big banks as with the concentration of hash rate among Bitcoin mining companies the
threat of a quantum attack against Bitcoin looks like a question of when not if assuming current
trends do continue and if you watched our video about quantum computing and Bitcoin you’ll know
there’s a large amount of old Bitcoin sitting in wallets that could theoretically be stolen by
a quantum computer most of which is already lost and if you’ve been keeping up with the headlines
about quantum computing and Bitcoin you’ll know that the Bitcoin community is slowly coming to
the realization that some kind of a hard fork to delete or freeze this old or lost Bitcoin will
be required at some point it goes without saying that this could set a very dangerous precedent
that could potentially open the door to adjusting Bitcoin’s maximum supply of 21 million if this
were to happen it would essentially destroy the narrative that Bitcoin is a digital gold and
it’s possible that even just freezing the Bitcoin that’s vulnerable to a quantum attack would
shake investor confidence again it appears to be a question of when not if this will need to
be done for what it’s worth it probably won’t happen for the foreseeable future and it could
even be a buying opportunity when it does happen now the final risk to Bitcoin to keep in mind
is the macro which includes everything from geopolitics to interest rates as we’ve seen any
kind of uncertainty around things like tariffs tends to be a huge headwind for Bitcoin while
any hint that emergency stimulus could be the result of these tariffs causes Bitcoin to pump put
simply sometime Bitcoin trades as a risk asset and sometimes it trades as a safe haven as far as
we can tell the biggest risk to Bitcoin on the macro front is that it fails to establish itself
as a safe haven and keeps trading as a risk asset particularly a higher risk higher reward bet on
US tech stocks and this is because risk assets are likely to experience lots of macro headwinds in
the coming years particularly US tech stocks for starters the emergence of a multipolar world is
likely to result in even more uncertainty around things like trade and geopolitics which will
be a headwind to risk assets meanwhile it looks like investors from around the world are slowly
starting to divest from US assets because of its domestic policies some macro analysts like Russell
Napia for example have gone as far as to argue that foreign investors like pension funds will
be forced to divest from US assets to purchase the government bonds of their respective countries
to suppress interest rates without printing money since the largest components of major stock
indices like the S&P 500 are tech stocks they will experience the most selling pressure and
if Bitcoin is seen by most investors as being a higher beta bet on US tech stocks then Bitcoin
could be sold off as part of this process and this is more likely than you think when you realize
that many of these tech companies like Tesla for example also hold Bitcoin on their balance
sheets conversely if Bitcoin manages to become a safe haven in the eyes of most investors then BTC
could very well continue its upon only trajectory and all those macro headwinds could become
tailwinds and that’s simply because Bitcoin is the only digital asset that can be self-custodied
and have zero counterparty risk this might not be much of a selling point right now but it will be
as the world becomes more fragmented and trust and cooperation between countries continues to decline
they will need a credibly neutral digital currency and with a bit of luck Bitcoin will become big
enough for it to play that role notably this could create some interesting incentives around Bitcoin
mining with countries potentially starting to run Bitcoin nodes and mine Bitcoin to ensure Bitcoin
remains credibly neutral and to gain more Bitcoin that they could then use to trade or whatever else
and you can learn more about that by watching our video right over here and if you’re not subscribed
to the channel yet well you can do that right over here this is Nick signing off thank you very
much for watching and I’ll see you again soon
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