JPMorgan Tells Saylor's Bitcoin Spigot: Cool It Before the Market Gets the Chills 🥶

JPMorgan said Strategy's new policy permitting selective bitcoin sales to fund preferred stock dividends has introduced avoidable "two-way" risk into crypto markets, adding a fresh layer of uncertainty and volatility at a time when institutional demand is already cooling. The Wall Street bank's analysts, led by Nikolaos Panigirtzoglou, argue that Strategy should be issuing common equity to enlarge its dollar reserves and reassure investors that no near-term bitcoin sales will be needed.

Earlier this week, Strategy (MSTR) formalized a policy that allows bitcoin sales to cover preferred dividend payments when appropriate, alongside authorizations for preferred stock repurchases and share buybacks. The company set a minimum cash reserve target equal to 12 months of preferred dividends and interest expense; its current $2.55 billion reserve covers roughly 17 months of obligations. JPMorgan's team said a higher cushion of 24 to 36 months would be required, even if that meant the common equity trading at a discount to net asset value.

Strategy holds 847,363 $BTC on its balance sheet, making it one of the largest corporate holders of the asset and a major source of demand. JPMorgan noted that Michael Saylor's company has purchased roughly $13.7 billion of bitcoin year to date, representing about 70% of the bank's estimate for total net digital asset inflows, and that Strategy now controls around 4% of bitcoin's total supply. Any shift toward selling, even occasionally, could meaningfully affect market liquidity, price dynamics and investor sentiment by introducing a new source of supply.

Demand from U.S. spot bitcoin exchange-traded funds has weakened sharply since their 2024 debut. The funds saw a record $4 billion in net outflows in June after a 13-day redemption streak pushed year-to-date flows into negative territory for the first time. JPMorgan said bitcoin came under pressure in late May and early June after Strategy disclosed in a June 1 regulatory filing that it sold 32 $BTC between May 26 and May 31 to fund dividend payments, compounding pressure from a broader repricing of Federal Reserve interest-rate expectations that had already weighed on bitcoin and gold. Bitcoin was last trading near $61,890.03, according to the report.

JPMorgan added that crypto sentiment could improve if Strategy expanded its reserves and if Congress passed market structure legislation, though the bank offered no specific timeline for either development. Strategy Executive Chairman Michael Saylor and JPMorgan did not immediately respond to requests for comment beyond the contents of the Wednesday report.