Bitcoin's $10B credit market grows after first major selloff

Bitcoin's corporate credit market has surpassed $10 billion in total issuance and continues to attract new entrants, even after a June selloff triggered margin calls on preferred shares and drove several instruments below par, according to a July 10 report from BitcoinTreasuries.

"The June liquidation event was the first real stress test for Bitcoin-linked credit products, and the market absorbed it without systemic failure," said Simon Gerovich, chief executive officer of Metaplanet, in a filing accompanying the company's announcement of a joint study to develop Bitcoin-backed digital credit products with stablecoin issuer JPYC and tokenization provider Progmat. Metaplanet holds more than 43,000 BTC and is exploring the use of its treasury as collateral for corporate bonds and other credit instruments under Project NOVA.

The June selloff saw Bitcoin drop more than 15% from its local highs, triggering margin calls on several Bitcoin-backed preferred share issuances. Strategy, formerly MicroStrategy, confirmed the sale of 3,588 BTC worth $216 million on July 8 to secure dollar liquidity and maintain payments on its preferred shares. The company's STRC preferred shares had fallen below their $100 par value, forcing Strategy to raise the dividend rate to 12% to protect the market price. Despite the stress, Strategy's total obligations of $22.2 billion — comprising $6.7 billion in convertible bonds and $15.5 billion in preferred shares — remain covered at 2.7 times by its Bitcoin holdings, according to an interactive credit model the company released July 10.

The resilience of the market has not deterred new entrants. Metaplanet's Project NOVA study, announced the same day, aims to package Bitcoin-linked credit products, stablecoin settlement, and security tokens into new yield instruments for retail and institutional investors in Japan. The company has already secured a $500 million Bitcoin-collateralized credit facility and targets 210,000 BTC by the end of 2027, roughly 1% of Bitcoin's fixed supply. The filing noted that "nothing has been determined" on issuance timing, terms, or yield, and any issuance would follow a separate announcement.

The margin call event exposed the leverage embedded in Bitcoin credit

The June liquidation cycle revealed how deeply Bitcoin's credit market has become intertwined with its spot price. When Bitcoin fell, preferred share issuers faced a choice between selling BTC or raising dividend rates. Strategy chose both, monetizing a portion of its treasury while hiking its STRC dividend to 12%. The company's interactive model shows that even if Bitcoin growth stops entirely, its existing reserves of $52.9 billion and a dollar cushion of $2.6 billion would cover dividend payments for 30 years. For perpetual breakeven, Bitcoin needs to rise just 3.33% annually.

Metaplanet's approach differs. Rather than issuing preferred shares against its Bitcoin holdings, the company is exploring a structure where Bitcoin serves as credit enhancement for digital corporate bonds, with payments and redemptions routed through JPYC's yen-pegged stablecoin and rights managed via Progmat's security token infrastructure. The study divides roles across four entities, with Metaplanet and its brokerage arm handling product design and distribution, JPYC managing stablecoin issuance, and Progmat providing regulated token infrastructure.

What comes next for Bitcoin credit

The market now faces a structural question: whether the June selloff was a one-time stress test or a preview of the volatility that Bitcoin-backed credit products will regularly encounter. Strategy's model suggests the company can withstand prolonged bear markets, but smaller issuers with thinner BTC treasuries may not have the same buffer. Metaplanet's study, if it leads to actual issuance, would test whether Bitcoin-backed corporate bonds can attract traditional Japanese institutional investors accustomed to low-yield yen-denominated debt.

The BitcoinTreasuries report noted that total corporate credit exposure to Bitcoin now exceeds $10 billion, a figure that has doubled in the past 12 months. The next test will come when Bitcoin faces another sustained drawdown — and whether the credit market's new entrants have built structures that can survive it.

This article is for informational purposes only and does not constitute investment advice.