Satoshi Institute · treasury stress test
Can the treasury survive the drawdown?
A Bitcoin treasury rarely dies from the drawdown itself. It dies when the drawdown lands at the moment the company needs cash, reserves run dry, and it's forced to sell at the bottom. This finds the line where that happens.
Liquid reserves cover every obligation across 18 months. The Bitcoin is never touched, so the drawdown is a paper loss you can hold through.
Max safe allocation
Reserves run dry
Trough BTC price
Ruin price
Book a Satoshi Institute briefing →
What this leaves out. Scenario modeling, not investment, treasury, or financial advice. Every output depends entirely on the assumptions entered above, and a real treasury faces lumpy cash flows, covenants, and tax effects this simplifies away. Recovery on trend uses the power-law fit and is an illustration, not a forecast. Decisions and their consequences are yours.
Used together with
Pair with the Allocation Modeler to size the position, then bring the 95% likely-range view back here to check the reserve floor survives the same distribution.
FAQ
What is a forced seller, and why does it determine the real risk?
The phrase "long-term holder" obscures the most important question: does the holder have the ability to hold?
A forced seller is any entity that must liquidate a position regardless of price — because of margin calls, regulatory capital requirements, covenant breaches, board mandates, or liquidity needs that can't be met any other way. The market doesn't care about your investment thesis when the covenant fires.
Why this matters more than volatility tolerance:
Volatility tolerance is a psychological concept. Forced-seller thresholds are structural. A company that allocates 5% of treasury to Bitcoin and holds $50M in cash has a very different survival envelope than one that allocated 30% and has thin operating cash. Both might say they're "comfortable with volatility." Only one has actually stress-tested whether they can survive a 70% drawdown without a forced exit.
Bitcoin's worst historical drawdowns:
- 2011: −94%
- 2013–2015: −86%
- 2017–2018: −84%
- 2021–2022: −77%
The tool models how long a treasury can absorb drawdown at a given allocation before cash needs force a sale. The output isn't a prediction — it's a structural constraint. If your number is below the historical worst-case, that gap is a board-level conversation, not a financial planning assumption.
What's a defensible runway floor for a Bitcoin treasury?
Most credit committees and audit committees we see anchor on the same range: 12–24 months of operating cash, untouched by any Bitcoin position, in instruments that cannot lose principal.
The reasoning behind that range:
- 12 months covers a normal-severity recession and a typical re-financing window
- 18 months covers a 2008-style credit market closure where new debt simply isn't available
- 24 months is the floor most boards want to see if any treasury asset is volatile or illiquid
Anything below 12 months of runway, the Bitcoin allocation question is premature — the company's first treasury task is building a base. Above 24 months of runway, the conversation shifts to what fraction of the excess can sit in a longer-duration store of value.
How should the recovery assumption be set?
Bitcoin's historical drawdown recoveries have ranged from 6 months (2020) to 35 months (2017–2020). The tool defaults to a conservative recovery assumption — slower than the mean — because the cost of being wrong on the optimistic side is forced selling at the bottom.
Three recovery scenarios worth testing:
- Fast: 12 months. Assumes a macro tailwind similar to 2020
- Base: 24 months. The historical median across full cycles
- Slow: 36+ months. Realistic for a deep bear without monetary easing
If the runway breaks under the slow scenario, the allocation is too large regardless of how confident you are in the base case.
Does this model debt covenants and leverage?
No, and that's its biggest simplification. Real corporate treasuries carry covenants — net worth floors, debt-to-EBITDA ceilings, asset coverage ratios — that can trip on a Bitcoin mark-down before the cash runway is anywhere near empty.
Use this tool as the cash-only first cut. Once an allocation passes the drawdown survival test, the second cut is: at what Bitcoin price does the mark-to-market loss put any covenant within 25% of its limit? That's the real forced-seller line for any leveraged business, and it usually fires earlier than cash runway does.
Methodology
Solves for the BTC drawdown depth at which reserves can no longer cover the policy-mandated cash floor and the treasury becomes a forced seller.
- Remaining BTC Value at Drawdown D
- V(D) = A × (1 − D)
- Policy Cash Floor
- F_min = F × R × B
- Trigger Drawdown
- D* = 1 − (F × R × B) ÷ A
- Trigger BTC Price
- P* = P_spot × (1 − D*)
- Monte-Carlo Survival Probability
- P(survive) = (1 ÷ N) × Σ 1[max_drawdown_i < D*]
A is allocation, B monthly burn, R required runway in months, F floor multiple. Paths are sampled from the empirical distribution of historical BTC drawdowns. The policy itself creates forced selling, not the price.