JPMorgan Says Strategy Bitcoin Sales Policy Adds Two-Way Flow Risk

JPMorgan said Strategy's decision to sell bitcoin selectively to cover preferred stock dividends has introduced two-way flow risk into crypto markets. The bank issued the assessment in a report on July 1. Strategy formalized the policy earlier this week.

It also authorized preferred stock repurchases and share buybacks while setting a minimum cash reserve equal to 12 months of preferred dividends and interest expense. The company's current $2.55 billion reserve covers roughly 17 months of obligations. JPMorgan recommended reserves covering 24 to 36 months of obligations.

Analysts led by Nikolaos Panigirtzoglou said Strategy should issue common equity to build those reserves even if the shares trade at a discount to net asset value. Strategy holds 847,363 BTC, equal to about 4 percent of bitcoin's total supply. The company purchased roughly $13.7 billion of the cryptocurrency year to date, representing about 70 percent of JPMorgan's estimate for total net digital asset inflows.

U.S. spot bitcoin ETFs recorded a record $4 billion in net outflows in June after a 13-day redemption streak pushed year-to-date flows negative for the first time. Bitcoin came under pressure in late May and early June after Strategy disclosed in a June 1 filing that it sold 32 BTC between May 26 and May 31 to fund dividend payments.

JPMorgan noted that Strategy's size means any shift toward selling creates an additional source of supply that could affect liquidity and sentiment. The bank said greater price volatility could raise Strategy's own cost of raising equity and debt for future purchases.