JPMorgan cast doubts on Strategy’s Bitcoin sales policy

JPMorgan Chase & Co. is concerned that Strategy’s new policy of selectively selling its Bitcoin holdings will introduce new risk to the crypto market. 

On Monday, Strategy announced a BTC monetization program through which the company can sell a portion of its 847,363 BTC holdings to support its preferred dividend payments and buybacks.

The so-called Digital Credit Capital Framework followed months of criticism of Strategy’s capital position amid declines in the price of BTC and MSTR. 

JPMorgan said the policy adds avoidable “two-way” flow risk to crypto markets.

In a Wednesday report, JPMorgan analysts led by Nikolaos Panigirtzoglou said Strategy has spent years as one of Bitcoin’s most consistent buyers, accounting for about 70% of total net digital asset inflows this year. 

The policy, as such, introduces a new risk that the biggest BTC buyer could sell off its holdings at any moment.

Strategy should raise 24 to 36 months of cash reserve

JPMorgan suggests that Strategy raise its cash reserve by issuing common equity to shore up investors’ confidence that it won’t need to sell its Bitcoin holdings.

Strategy currently holds $2.55 billion in cash, enough to cover about 17 months of preferred dividend and interest obligations. The analysts believe the buffer is not wide enough.

They said, “a higher coverage of 24-36 months would be needed to make investors more comfortable with the idea that Strategy would not need to sell bitcoins in the foreseeable future.”

Analysts split on what comes next

Not everyone at the research desks shares JPMorgan’s caution. Benchmark Equity Research reiterated a Buy rating on MSTR with a $570 price target, implying more than 500% upside from recent levels, following the sales policy.

Analyst Mark Palmer called the capital framework “formal permission” to put Strategy’s capital machine into reverse during periods of market stress, framing it as a net positive for shareholders, as Cryptopolitan reported.

Meanwhile, the MSTR price has made gains since the policy. The shares rose 12.6% to $92.68 on Monday, while STRC gained roughly 10% to around $83.67 after trading below $75 the previous week. 

By Wednesday, MSTR had pushed past $100, adding $5 billion in market cap and climbing 27% from Friday’s low. 

At the time of writing, MSTR was trading at $100.83, a 7.93% increase on the day.