South Korean Firms Struggle with Risky Bitcoin Strategies

In 2025, a wave of small South Korean companies began copying MicroStrategy’s approach, buying Bitcoin with borrowed funds under the banner of “treasury management strategies.” However, cracks are now appearing in this high-risk model.

Bitmax, formerly an augmented reality firm, illustrates the gap between the concept of Digital Treasury Assets (DAT) and its execution in South Korea’s small-cap market. Companies with weak cash flows are using dilutive financing to purchase cryptocurrency, leaving little room for error if prices fall.

Bitmax Faces Sharp Decline Amid Capital Reduction

On March 9, Bitmax announced a 4-to-1 stock consolidation to write off accumulated losses. The next day, shares dropped more than 10%, trading around $0.63 (909 won). The company holds 551 BTC, mostly purchased via 13 over-the-counter deals directly from its chairman for approximately $55 million, with a reported $6 million overpayment compared to market prices.

Despite regulators opening exchanges to public companies in mid-2025, nearly 60% of Bitmax’s purchases occurred after that date through the chairman. While large OTC deals can reduce market impact, reliance on affiliated transactions has drawn regulatory attention.

The capital reduction cut Bitmax’s paid-in capital from $14.5 million to $3.6 million, and shares outstanding from 41.9 million to 10.5 million. From mid-2025 highs, Bitmax shares have fallen roughly 88%, compared with a 70% decline for MicroStrategy. Bitcoin itself fell only 12% over the same period, highlighting the amplified risks of leveraged crypto strategies.

Structural Risks and Mounting Debt

Bitmax’s Q3 2025 report shows total debt soaring from $4.4 million to $74 million in nine months, mainly through convertible bonds used to buy Bitcoin. The company posted a $52 million net loss, including $43 million in derivative-related losses, while its core AR business generates minimal cash flow.

Management plans to grow revenue through a new IT subsidiary targeting $22 million annually, but whether this can service $74 million in debt remains uncertain. Two weeks after reporting the losses, the company implemented the capital reduction.

A Broader Trend on KOSDAQ

Bitmax is one of at least four small-cap KOSDAQ companies following this pattern: new ownership, name change, share issuance, and Bitcoin purchases. February saw an average 29% drop in their stock prices. Some, like Parataxis Korea, face additional risks with crypto-backed USDT loans.

While MicroStrategy has successfully executed its Bitcoin strategy with institutional support and scale, the South Korean copycats show that without size or trust, the risks far outweigh potential benefits.