JPMorgan says Strategy’s ability to sell bitcoin for dividend payments introduces a new source of uncertainty to crypto markets. The bank recommends that the company expand its cash reserves instead of relying on potential bitcoin sales.
JPMorgan says Strategy’s ability to sell bitcoin for dividend payments introduces a new source of uncertainty to crypto markets. The bank recommends that the company expand its cash reserves instead of relying on potential bitcoin sales.
JPMorgan has warned that Strategy’s new capital policy creates “two-way” risk for crypto markets by allowing the company to sell bitcoin selectively to fund preferred-stock dividends. Strategy also authorized preferred-stock repurchases and share buybacks under the framework.
JPMorgan has warned that Strategy’s new capital policy creates “two-way” risk for crypto markets by allowing the company to sell bitcoin selectively to fund preferred-stock dividends. Strategy also authorized preferred-stock repurchases and share buybacks under the framework.
The policy matters because Strategy is both a major corporate bitcoin holder and an important source of demand. With 847,363 BTC—around 4% of bitcoin’s total supply—on its balance sheet, occasional sales could affect liquidity, market sentiment and price volatility, according to the bank.
Strategy set a minimum cash reserve target covering 12 months of preferred dividends and interest expenses. Its current $2.55 billion reserve represents about 17 months of obligations, but JPMorgan analysts argued that investors would be more comfortable with coverage of 24 to 36 months.
The bank said Strategy could build that larger buffer by issuing common equity, even if its shares trade below net asset value. A stronger reserve would reduce the likelihood that the company needs to sell bitcoin to meet near-term obligations.
Strategy disclosed that it sold 32 BTC between May 26 and May 31 to fund dividend payments. JPMorgan said the transaction added pressure to an already weak market, while warning that greater volatility could also raise Strategy’s cost of issuing equity and debt to finance future bitcoin purchases.
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