Coinbase has issued a warning about the financial state of public crypto investment vehicles. The alert comes as these firms face rising debt and limited refinancing options. If current conditions persist, forced crypto asset sales may occur.

Rising Debt Threatens Crypto Holdings

According to a recent report by Coinbase, many Publicly Traded Crypto Vehicles (PTCVs) have issued convertible bonds to raise funds. These bonds helped the firms accumulate crypto holdings during earlier market cycles. However, with crypto prices now unstable and refinancing conditions tightening, these obligations may trigger liquidation.

Coinbase noted that while most PTCVs have maintained manageable loan-to-value ratios, the inability to refinance could create pressure. The firm explained, “The risk of forced selling pressure arises because many of these PTCVs have issued convertible bonds to raise cheap money to buy various crypto assets.”

Should the crypto prices keep dropping, and refinancing options be tight, these companies may have no option but to sell their crypto. Such selling would enhance volatility in the digital asset market. Also, Coinbase highlighted that the capital structures of the individual crypto investment firms are private and cannot be easily tracked.

Coinbase Sees Cautious Optimism Amid Institutional Accumulation

Despite refinancing risks, Coinbase announced that corporate crypto accumulation is proceeding. This dynamic is an indication of how traditional institutions are increasingly becoming interested in digital assets. Coinbase estimates that later this year, in 2025, there may be growth prospects in the sphere.

Large institutions are exploring balance sheet strategies involving Bitcoin and other digital assets. The platform noted that this trend could help offset selling pressure triggered by struggling PTCVs. As of now, Bitcoin remains the core asset of interest among institutional buyers.

Coinbase made it clear that debt risks cannot be overlooked, but the interest of investors is still strong. Investors in the market still desire to have exposure to regulated investment products such as ETFs. With the increase in the number of companies adopting digital assets, data on-chain accumulation provided by Messari and Glassnode indicates that long-term holders are undeterred

Legislative Developments Could Shape Market Structure

Coinbase also updates pending U.S legislation on crypto industry. The company thinks that 2H25 could present new legislation that outlines the market framework and protection to investors.

There are two bills, the STABLE Act and the GENIUS Act, which could become one. This combined bill could be passed by the U.S. Senate before the August 4 recess. The legislation would create reserve requirements, AML compliance mandates, and customer protections for stablecoin issuers.

Coinbase also discussed the Digital Asset Market Clarity Act. This bill seeks to clarify the jurisdiction of the SEC and CFTC over crypto assets. Should it pass, it would create a two-tier system that differentiated digital commodities and investment contracts.

ETF Market Activity Reflects Broader Interest

SEC is looking at approximately 80 crypto ETF filings. These are multi-asset funds, products made possible by staking, and an altcoin ETF. Decisions on many of these products are expected between July and October.

Coinbase noted that although risks related to yield strategies remain, core assets like Bitcoin are relatively stable. Select altcoins may still offer returns depending on project-specific fundamentals. Forced sales by debt-heavy firms could affect short-term pricing, but long-term strategies remain in play.