Cryptocurrency is attracting the attention of publicly traded companies. While the potential for impressive gains is tempting, cryptocurrency investments come with significant risks and insurance implications that company leaders should consider carefully. For microcap companies, the volatility of cryptocurrency can be especially problematic.
Riding on the Bitcoin Wave
Bitcoin has had a volatile trading history, as documented by Investopedia. It was first introduced in 2009 with a price of zero. By the end of 2010, its price had climbed to $0.30. On June 8, 2011, it reached $29.60 before plummeting to around $5 by the end of the year amid an economic inflation. The following decade saw more growth, and on April 14, 2021, the coin reached $64,895 before dropping by 50% to $30,829 on July 19. As of August 4, 2025, the price stands at more than $115,000.
Some forecasters predict more gains in the future. However, it’s worth remembering that there are no guarantees. If history is any indication, growth is possible, but it may be highly volatile with periods of sharp declines.
Despite the risks, the massive gains have attracted investors, including both individuals and businesses of various sizes, although the motivations are a little different.
The Allure of Bitcoin for Public Companies
CNBC reports that public companies acquired approximately 131,000 bitcoins in the second quarter of 2025, increasing their bitcoin balance by 18%. Nick Marie, head of research at Ecoinmetrics, explains that public companies are accumulating bitcoin to increase shareholder value. The idea is that having bitcoin makes them look attractive to proxy buyers.
For investors who want to get into crypto, companies that purchase bitcoin are an option. According to Fortune, instead of simply buying cryptocurrency directly, investors can buy stocks in a public company that has cryptocurrency on its balance sheet. Data from Bitcoin Treasuries shows that at least 160 firms now have bitcoin on their balance sheet.
The Risk of Crypto Investments
Some bitcoin investors have been rewarded handsomely with huge returns, but these rewards have come with risk. In addition to cryptocurrency’s propensity for volatility, it’s also possible that we’re in another crypto bubble. If prices fall, any company that holds crypto could lose substantial value, and investors could lose interest.
However, price declines aren’t the only risk that companies need to consider.
When a public company takes a cryptocurrency investment, the group that holds the cryptocurrency may gain a majority share in the company. The price per share may increase substantially, but the shareholder value is diluted at the same time. If the crypto investor, who is now a majority investor, decides to sell their stock, effectively converting their crypto to cash, the company ends up with a lower stock value. Furthermore, part of the company’s value is now held in crypto rather than cash, which may be less versatile for cashflow. Crypto investors do not necessarily have the best interest of the company in mind. They are making financial decisions for their own benefit.
The D&O Insurance Implications of Crypto Investments
Crypto investments can also have a big impact on D&O insurance, leading to much higher prices.
There are a few reasons for this. First of all, a change in control of the company will necessitate a rewriting of the D&O policy. At the same time, if the investment causes the company value to increase, the cost of D&O coverage will also increase. Let’s say your microcap was paying $100,000 for coverage before. After the investment, this could surge to $500,000.
Your risk profile has also changed. Your company is now impacted by crypto volatility, and that could ultimately have an impact on the value of your stock and your company.
Cyber and Crime Implications
Legitimate investors and public companies aren’t the only ones eyeing bitcoin. Hackers are also attracted to cryptocurrencies.
Someone manages crypto access via a wallet and keys. What happens if that person is hacked? Or if that person is kidnapped and held for ransom? That may seem outlandish, but there have actually been cases of kidnappings targeting cryptocurrency executives. According to Reuters, a series of violent kidnappings targeting the crypto industry in France have set crypto leaders on edge. CNN says another kidnapping occurred in Manhattan, with two men accused of torturing a man for several weeks in an attempt to gain access to his cryptocurrency.
If a company’s cryptocurrency is stolen, cyber and crime insurance typically won’t cover the loss – and the type of policy that does cover this loss is very expensive.
Beware of the Bubble
Bitcoin in particular, and cryptocurrency in general, are hot right now. Everyone wants a piece of the action. However, past events like the dot-com bubble, or even past crypto bubbles, show that surging values also bring risk.
When markets are highly volatile, some people come out ahead – and others are left holding the bag. If you’re a public company, think twice before taking on cryptocurrency investments. Doing so could significantly increase your exposures and your D&O costs.
Are you considering crypto investments, or have you taken some on already? Contact NSI for a review of your D&O coverage.
