JPMorgan Flags Strategy's Bitcoin Selling Policy as Source of Market Volatility Risk

JPMorgan warned Wednesday that Strategy's newly formalized policy permitting selective bitcoin sales to cover preferred stock dividend payments introduces avoidable 'two-way' flow risk into cryptocurrency markets, heightening price uncertainty and volatility. The Wall Street bank's analysts, led by Nikolaos Panigirtzoglou, outlined their concerns in a research report published the same day.

Strategy, the Nasdaq-listed company formerly known as MicroStrategy and chaired by Michael Saylor, earlier this week codified a framework allowing it to sell bitcoin when necessary to meet preferred dividend obligations. The policy also authorizes preferred stock repurchases and common share buybacks as part of a broader capital structure overhaul. The company set a minimum cash reserve target equivalent to 12 months of preferred dividends and interest expense; its current $2.55 billion reserve covers approximately 17 months of obligations.

JPMorgan's analysts argued that figure is insufficient. The bank said a cash buffer covering 24 to 36 months of dividend obligations would be required to reassure investors that Strategy would not need to liquidate bitcoin holdings in the near term. Analysts suggested the company could achieve that level by issuing common equity to raise dollar reserves, even if doing so caused the stock to trade at a discount to net asset value.

Strategy holds 847,363 BTC on its balance sheet, representing roughly 4% of bitcoin's total circulating supply. The company has purchased approximately $13.7 billion worth of bitcoin year to date, a figure JPMorgan estimates accounts for about 70% of total net digital asset inflows across the market. That scale makes Strategy a dominant source of demand — and any shift toward selling, even in small amounts, carries meaningful implications for market liquidity and price dynamics.

The concern is not hypothetical. Bitcoin came under selling pressure in late May and early June after Strategy disclosed in a June 1 regulatory filing that it had sold 32 BTC between May 26 and May 31 to fund dividend payments. Those sales added to existing headwinds from a broader repricing of Federal Reserve interest-rate expectations that had already weighed on both bitcoin and gold.

Institutional demand from U.S. spot bitcoin exchange-traded funds — the largest source of crypto inflows since their January 2024 launch — has also deteriorated sharply. The funds recorded a record $4 billion in net outflows in June following a 13-day consecutive redemption streak that pushed year-to-date flows into negative territory for the first time since the products launched.

JPMorgan cautioned that greater bitcoin price volatility stemming from Strategy's two-way market presence could ultimately harm the company itself, by raising the cost of issuing equity and debt to finance additional bitcoin acquisitions — the core mechanism underpinning its treasury strategy.

The bank nonetheless acknowledged that current bearish sentiment could function as a contrarian indicator. A meaningful recovery in the second half of 2025, analysts said, would likely depend on two catalysts: Strategy materially expanding its cash reserves, and U.S. lawmakers advancing pending cryptocurrency market structure legislation through Congress.