JPMorgan Says Strategy's Bitcoin-Sale Policy Adds Two-Way Risk
The bank says Strategy's plan to sell bitcoin for preferred dividends adds volatility just as spot ETF demand turns negative for the year.
Strategy spent years as bitcoin's most reliable buyer. Now JPMorgan says the company has handed the market a fresh problem. In a Wednesday report, the bank's analysts wrote that Strategy's decision to allow selective bitcoin sales to cover preferred stock dividends introduced avoidable "two-way" risk, adding uncertainty and volatility to a market that was already softening.
What Strategy changed
Earlier this week, Strategy formalized a policy permitting bitcoin sales to fund preferred dividend payments when appropriate, alongside preferred stock repurchases and common share buybacks. It set a minimum cash cushion equal to 12 months of preferred dividends and interest expense. The current reserve, $2.55 billion, covers about 17 months. JPMorgan wants far more. The team led by Nikolaos Panigirtzoglou argued for 24 to 36 months of coverage, funded by issuing common equity even if that pushes the stock to a discount to net asset value, so investors stop worrying that Strategy will ever be forced to sell.
Why the size matters
The worry is about scale. Strategy holds 847,363 BTC, roughly 4% of the total supply, and Michael Saylor's company has bought around $13.7 billion of it this year, about 70% of JPMorgan's estimate for total net digital asset inflows. A buyer that big becomes a new source of supply the moment it starts selling. The market already got a preview. Bitcoin slid in late May and early June after a June 1 filing showed Strategy had sold 32 BTC between May 26 and May 31 to cover dividends. Tiny sale. Loud signal. And it landed just as traders repriced Federal Reserve rate expectations, which had already dragged on bitcoin and gold.
Demand is thinning
The timing is awkward. US spot bitcoin ETFs, the largest engine of institutional buying since their 2024 debut, are bleeding. The funds logged a record $4 billion in net outflows in June after a 13-day redemption streak pushed year-to-date flows negative for the first time. Strip out Strategy as a steady bid, and one of the last big sources of demand starts to look thin.
For now, the reserve buys Strategy 17 months before the math forces a call. JPMorgan wants that number closer to 36. Bitcoin changed hands near $61,600 while the argument plays out.
Sources
- JPMorgan says Strategy's bitcoin sales policy adds 'two-way risk' to crypto markets
- JPMorgan digital assets report led by Nikolaos Panigirtzoglou · JPMorgan
Disclosure
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