How to Size a Bitcoin Treasury Allocation Under RARTA

Step 1 — Define unrestricted reserves

Strip out operating cash, working-capital buffer, debt-service coverage, escrowed amounts, and any cash earmarked for committed capex or M&A. What remains is the pool the allocation is sized against. This number is almost always smaller than the headline cash balance.

Step 2 — Set the covenant constraint

Identify every covenant — leverage, liquidity, fixed-charge — that references a cash or net-asset metric. The allocation cannot push the company within a defined margin (typically 25%) of any covenant trigger at the stressed Bitcoin price.

Step 3 — Run the drawdown test

Assume an 80% peak-to-trough Bitcoin drawdown sustained for 18 months — historically the worst real-world case. The remaining balance sheet must continue to meet operating-cash needs, covenants, and minimum-liquidity policy without forced selling.

Step 4 — Set the upper, lower, and emergency bands

• Upper band: the maximum % of unrestricted reserves the drawdown test survives
• Lower band: the floor below which the allocation is considered immaterial to mandate
• Emergency threshold: the drawdown level at which pre-authorized SRF actions execute

Step 5 — Pilot at the lower band

First tranche at the lower band, defined review window (typically two reporting periods), and explicit success and exit criteria. Scaling to the upper band requires evidence from the pilot, not a recommitment to the original thesis.