Fitch Ratings has flagged Bitcoin-backed securities as carrying high market value risk due to sharp price volatility.
The credit rating agency said these products often align with speculative-grade credit profiles.
Bitcoin-backed securities typically involve pooling Bitcoin or Bitcoin-linked assets and issuing debt against the collateral.
Fitch warned that sudden Bitcoin price swings could quickly erode collateral value.
The agency said weakened coverage ratios could trigger margin calls and forced liquidations.
Fitch cited counterparty risk as another concern within these structures.
The agency referenced crypto lender collapses in 2022 and 2023 as cautionary examples.
Bitcoin’s price volatility is a main risk consideration.
Fitch said.
Fitch noted that breaches of required coverage levels could crystallise losses for lenders and investors.
The warning follows a separate alert last month about risks to US banks with large digital asset exposure.
Fitch said banks face potential reputational, liquidity and compliance risks from crypto involvement.
The assessment comes as institutional interest in crypto-linked credit products continues to grow.
Fitch distinguished these securities from spot Bitcoin ETFs, which it said function more like equity products.
The agency added that ETF adoption could help broaden Bitcoin’s holder base and reduce volatility over time.
At the time of reporting, Bitcoin price was $91,948.71.