JPMorgan to Saylor: Stop Hoarding Cash, Start Hoarding Cash 🏦

JPMorgan (JPM) said Strategy's (MSTR) new policy permitting selective bitcoin $BTC $61,890.03 sales to fund preferred stock dividends has introduced avoidable "two-way" risk into crypto markets, increasing uncertainty and volatility. Earlier this week, Strategy formalized the policy, allowing bitcoin sales to support preferred dividend payments when appropriate, while also authorizing preferred stock repurchases and share buybacks as part of a broader capital structure strategy. 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 analysts "believe a higher coverage of 24-36 months would be needed (by issuing common equity to further increase dollar reserves even if this leads to the common equity trading at a discount to NAV) to make investors more comfortable with the idea that Strategy would not need to sell bitcoins in the foreseeable future," the team led by Nikolaos Panigirtzoglou said in its Wednesday report. The bank noted that Strategy holds 847,363 $BTC and has become one of the largest corporate buyers of the cryptocurrency, purchasing roughly $13.7 billion worth year to date, about 70% of JPMorgan's estimate for total net digital asset inflows. The company controls around 4% of bitcoin's total supply.

The new framework allows Strategy to transition between buyer and seller depending on cash requirements, a departure from its historical role as a near-continuous absorber of supply. 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.

Demand for U.S. spot bitcoin exchange-traded funds, the largest source of institutional crypto buying since their 2024 debut, has weakened sharply in recent months. 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, adding to the fragile backdrop for any additional strategy-led selling. Strategy also authorized preferred stock repurchases and launched a $1 billion common stock buyback program alongside the sales policy update.

Crypto sentiment could improve if Strategy expands its reserves and Congress passes market structure legislation, JPMorgan said, pointing to the proposed CLARITY Act as a potential catalyst for restoring market integrity and supporting bitcoin's price. Even with that prospect, the bank stressed that any shift toward selling, even occasionally, could influence market liquidity, price dynamics and investor sentiment by introducing a new source of supply into a market already digesting ETF redemptions.