JPMorgan Warns Strategy Bitcoin Sale Policy Adds “Two-Way Risk”

JPMorgan Critique of Strategy’s BTC Monetization Program

JPMorgan analysts led by Nikolaos Panigirtzoglou assessed Strategy’s recently announced BTC Monetization Program, which permits the company to sell bitcoin to generate up to $1.25 billion in proceeds. These funds can be used to bolster cash reserves, pay preferred stock dividends and interest expenses, or support preferred stock repurchases and share buybacks as part of capital structure optimization.

According to the analysts, allowing bitcoin sales for these purposes introduces “two-way risk” into crypto markets and increases uncertainty and volatility for bitcoin prices. They said this outcome could have been avoided if Strategy had chosen to issue equity to rebuild reserves for future dividend payments instead of relying on potential bitcoin disposals.

Strategy also set a minimum cash reserve target covering 12 months of preferred dividends and interest expenses. Its current cash reserve of $2.55 billion covers around 17 months of these obligations. JPMorgan’s team recommended a higher buffer, suggesting coverage of 24 to 36 months, funded by issuing common equity even at a discount to net asset value, to reassure investors that bitcoin sales would not be needed in the foreseeable future.

Market Impact and Conditions for a Stronger Second Half

JPMorgan highlighted Strategy’s significant impact on crypto markets, noting that it is the largest bitcoin holder, with about 4% of total BTC supply, and remains a major purchaser. The firm has acquired approximately $13.7 billion in bitcoin this year, which the analysts estimate represents around 70% of the overall digital asset flows tracked by the bank. In this context, they view even the possibility of future bitcoin sales as a source of additional market uncertainty and volatility.

The analysts warned that greater price volatility could negatively affect Strategy’s valuation, which they said is closely tied to bitcoin’s price. A lower valuation would raise the cost of issuing equity and debt to fund further bitcoin purchases. They also noted that crypto markets are already pricing in this new two-way flow risk: bitcoin has faced notable price pressure in recent weeks after Strategy sold 32 BTC in late May to meet dividend obligations, coinciding with broader weakness in the “debasement trade” in both bitcoin and gold amid shifting expectations for U.S. Federal Reserve policy.

Looking ahead, JPMorgan said a stronger second half for crypto markets will depend on Strategy rebuilding its cash reserves to cover 24 to 36 months of dividend obligations and on Congressional approval of the U.S. market structure bill, the Clarity Act. If these conditions are met, the analysts said current weak sentiment in crypto markets could ultimately prove to be a “bullish contrarian signal” later in the year.

FAQ

What is Strategy’s BTC Monetization Program?
Answer: It is a policy that allows Strategy to sell bitcoin to raise up to $1.25 billion for cash reserves, preferred stock dividends and interest expenses, and capital structure measures such as preferred stock repurchases and share buybacks.

Why does JPMorgan view the policy as risky for crypto markets?
Answer: JPMorgan argues it introduces “two-way risk,” as Strategy can now be both a major buyer and potential seller of bitcoin, increasing uncertainty and volatility in bitcoin prices given the company’s large holdings and market influence.

How much bitcoin does Strategy hold and how active is it as a buyer?
Answer: Strategy is described as the largest bitcoin holder, with about 4% of total BTC supply, and it has purchased roughly $13.7 billion worth of bitcoin this year, accounting for around 70% of JPMorgan’s estimated overall digital asset flow.

What reserve level does JPMorgan recommend for Strategy?
Answer: The analysts recommend cash reserves covering 24 to 36 months of preferred dividend and interest obligations, funded by issuing common equity, compared with the current reserve covering about 17 months.