Bit Digital CEO: Guaranteed debt may destroy DAT company during a bear market, and leverage risks should be considered carefully

ChainCatcher news, according to The Block, Bit Digital CEO Sam Tabar stated during the Token 2049 summit in Singapore that digital asset treasury (DAT) companies should consider adopting unsecured debt financing instead of secured debt to better cope with potential bear markets.

"The most efficient way to enhance per-share crypto asset holdings is through debt financing," Tabar, who is also the CEO of AI company WhiteFiber, pointed out in an interview with The Block on Wednesday. "While increasing crypto asset holdings without changing equity is good, the choice of financing type is crucial—wrong leverage can destroy a business."

Tabar warned that several companies building Ethereum treasuries have issued secured debt, stating, "Such debt carries extremely high risks." He explained, "When Ethereum assets depreciate, creditors will pursue the company and the collateralized assets. Debt instruments are good, but they must maintain an unsecured nature." This statement follows Bit Digital's announcement on Tuesday to expand its convertible bond issuance to $135 million. The senior unsecured bonds have an annual interest rate of 4%, with interest paid semi-annually.