JPMorgan says Strategy’s Bitcoin strategy now carries more market risk after the company gave itself room to sell BTC▲$62,206.00 when needed.
JPMorgan Chase, the largest U.S. bank, said Michael Saylor Strategy‘s decision to selectively sell Bitcoin to fund preferred-stock dividends and manage its balance sheet has created an “avoidable” two-way flow risk, Bloomberg reports, citing the bank’s latest report authored by Nikolaos Panigirtzoglou, managing director at JPMorgan.
The bank said Strategy would likely need enough liquidity to cover two to three years of dividend payments before investors feel confident it won’t need to sell more BTC.
Strategy is still one of the largest forces in the Bitcoin market. JPMorgan said the company has bought about $8.2 billion of Bitcoin this year, accounting for roughly 70% of estimated net crypto flows year-to-date. Its holdings now also represent about 4.2% of Bitcoin’s total supply.
Panigirtzoglou wrote:
“With the company’s valuation inextricably linked to the price of Bitcoin, more uncertainty and volatility in crypto markets could have a negative impact on the company’s valuation, thus raising the cost of issuing equity and debt to fund additional Bitcoin purchases.”
Read also: Strategy’s Bitcoin Buying Machine May Be Losing Power, Bitwise Says
Strategy Rewrites Playbook
Earlier this week, Strategy said it now has broader authority to sell BTC, buy back securities and preserve liquidity.
The company also revealed that after raising its cash reserve to around $2.2 billion and adding more than $1.2 billion in board-authorized Bitcoin sale capacity, it had a little more than two years of payment coverage.
Strategy shares are up by about 20% since the announcement of the framework, though they’re down about 75% from where they were a year ago. Shares of its STRC also have risen but are trading below the $100 per share required for it to issue them at a profit.
Read more: Glassnode Warns Bitcoin Bottom May Still Need Final Washout
