Bit Digital CEO Warns Secured Debt Could Harm Ethereum Treasury Firms

TLDR

Bit Digital raised $135 million via unsecured convertible notes to avoid risks.
CEO Sam Tabar warns secured debt may destroy Ethereum treasury firms.
Bit Digital holds 121,252 ETH worth over $520 million as of August 2025.
Tabar suggests unsecured debt is safer for digital asset treasury companies.

Bit Digital’s CEO Sam Tabar has raised a critical warning for digital asset treasury (DAT) firms, advising them to reconsider the type of debt financing they use. Tabar believes that secured debt could severely damage companies during a bear market. His cautionary remarks come after Bit Digital’s recent announcement of a large convertible note offering. In a shifting market, leveraging debt could lead to dire consequences for treasury firms relying on Ethereum.

Shift in Strategy for Digital Asset Treasury Firms

Sam Tabar, CEO of Bit Digital, shared concerns about the risks of using secured debt in a bear market. He emphasized that while debt can help firms acquire more crypto, especially Ethereum, using the wrong type of leverage can have severe consequences.

“Debt is amazing, but you’ve got to keep it unsecured,” said Tabar in a recent interview with The Block. He pointed out that secured debt, where creditors have a claim on assets like Ethereum, increases vulnerability when crypto prices fall.

Bit Digital, a prominent Ethereum treasury firm, recently announced an upsized $135 million convertible note offering. These notes, which are unsecured, aim to raise funds while avoiding the pitfalls of secured debt. Tabar’s comments underscore the difference in how companies should approach financing to ensure their survival in volatile markets.

Dangers of Secured Debt in a Bear Market

Tabar warned that secured debt could “destroy” many Ethereum treasury firms if the market turns bearish. In a scenario where the price of Ethereum drops, creditors with secured debt can claim the underlying assets.

This could lead to significant losses or even company collapse. Tabar highlighted that many Ethereum treasury firms have issued secured debt, which could prove fatal if the market experiences a downturn. The CEO suggests that unsecured debt offers a safer alternative in such cases.

In June 2025, Bit Digital transitioned from bitcoin mining to focus on Ethereum staking and treasury operations. The company’s goal is to hold significant Ethereum reserves while also benefiting from the growth of Ethereum. With a current stake of 121,252 ETH, valued at over $521 million, Bit Digital’s approach contrasts with other firms that may rely more heavily on secured debt to acquire crypto assets.

Bit Digital’s Strategy and the Role of Convertible Notes

Bit Digital’s approach involves using convertible notes to raise capital for acquiring Ethereum without the risks of secured debt. These notes offer a 4% annual interest rate, paid semiannually, and are designed to be senior and unsecured. This strategy, similar to that used by prominent investor Michael Saylor, allows Bit Digital to increase its crypto holdings without the added pressure of secured obligations.

Convertible notes provide flexibility and are often seen as a way to raise funds while minimizing risk. For Bit Digital, the decision to issue unsecured notes is about ensuring the firm’s financial stability, especially during potential market downturns. Tabar also mentioned that Bit Digital has been stacking Ethereum since 2023, with an average acquisition price of about $2,400 per ETH, which places the company in a relatively strong position despite market volatility.

Preparing for Future Market Challenges

Looking ahead, Tabar emphasized that digital asset treasury firms should avoid over-leveraging with secured debt. While using debt can increase crypto holdings without diluting shares, the risk of a bear market poses significant challenges. If ETH prices drop, the company could be forced to liquidate assets to cover its debt obligations, a scenario that could severely impact operations.

Bit Digital’s transition to an Ethereum-focused treasury firm reflects a broader trend in the industry as companies seek to accumulate more crypto. However, Tabar’s advice highlights the need for caution in the use of leverage. DAT firms that continue to rely on secured debt could face serious risks if the market experiences another downturn, leading to potential losses and forced asset sales.

The post Bit Digital CEO Warns Secured Debt Could Harm Ethereum Treasury Firms appeared first on CoinCentral.

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