Credit rating company Fitch Ratings warns of high risk associated with Bitcoin-backed securities, raising concerns for institutional investors. The agency cites the speculative-grade credit profiles and volatility of Bitcoin as potential risks. Fitch also highlights past crypto lender failures as cautionary examples of collateral-backed models unraveling in market stress.

Fitch emphasizes the importance of coverage levels in Bitcoin-backed securities, warning that breaches could lead to rapid erosion of collateral value and losses. The agency previously warned US banks about risks associated with significant digital asset exposure, including reputational and compliance risks. Fitch’s latest assessment comes amid Bitcoin’s growing role in corporate credit.

Bitcoin’s increasing role in corporate credit profiles is evident, with public companies like Strategy accumulating large amounts of Bitcoin to secure debt and expand exposure. Fitch’s warning focuses on credit and securitized instruments tied to underlying collateral value, rather than spot Bitcoin ETFs. The agency acknowledges that ETF adoption could diversify Bitcoin’s holder base and potentially reduce price volatility.

Read more at CoinTelegraph: Fitch Warns Bitcoin-Backed Securities Pose High Market Value Risk