JPMorgan says Strategy's bitcoin sales policy adds 'two-way risk' to crypto markets
Key takeaways
- The bank argued Strategy should hold cash reserves covering 24–36 months of dividend obligations, above its current 17-month buffer.
- The company also set a minimum cash reserve target equal to 12 months of preferred dividends and interest expense.
- Strategy has become one of the largest corporate holders and buyers of bitcoin, with 847,363 BTC on its balance sheet.
The bank argued Strategy should hold cash reserves covering 24–36 months of dividend obligations, above its current 17-month buffer. Crypto sentiment could improve if Strategy expands reserves and Congress passes market structure legislation.Wall Street bank JPMorgan (JPM) said Strategy's (MSTR) decision to allow selective bitcoin BTC$61,846.35 sales to fund preferred stock dividends has introduced avoidable "two-way" risk into crypto markets, increasing uncertainty and volatility.
Earlier this week, Strategy formalized a 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 also 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.
However, JPMorgan's 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.