JPMorgan Warns Strategy’s Bitcoin Selling Policy Introduces ‘Two-Way Risk’ to Crypto Markets

JPMorgan said Strategy’s approach to funding preferred dividend payments through selective bitcoin sales introduces unnecessary market uncertainty and should instead be replaced with equity issuance aimed at strengthening cash buffers.

The Wall Street bank said Strategy’s (MSTR) decision to permit occasional bitcoin BTC $61,877.79 sales to cover preferred stock dividends has created avoidable “two-way” risk in crypto markets, adding volatility and uncertainty.

Earlier this week, Strategy introduced a policy allowing bitcoin sales when needed to support preferred dividend obligations, alongside authorization for share buybacks and preferred stock repurchases as part of a broader capital allocation framework. The firm also established a minimum liquidity target equal to 12 months of preferred dividends and interest expenses, with its current $2.55 billion reserve covering about 17 months.

However, JPMorgan analysts argued that a stronger buffer of 24–36 months would be more reassuring for investors. They suggested this could be achieved through additional common equity issuance to boost cash reserves, even if it results in the stock trading at a discount to net asset value, according to a note led by Nikolaos Panigirtzoglou.

Strategy remains one of the largest corporate holders of bitcoin, with 847,363 BTC on its balance sheet. Its large-scale accumulation has made it a key driver of institutional demand, meaning any shift toward even limited selling could affect liquidity, pricing dynamics, and overall market sentiment by introducing a new supply source.

At the same time, demand from U.S. spot bitcoin ETFs—the dominant institutional inflow channel since their 2024 launch—has weakened significantly. The funds recorded $4 billion in net outflows in June after a 13-day redemption streak pushed year-to-date flows into negative territory for the first time.

JPMorgan noted that bitcoin faced renewed 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. That selling added to broader weakness driven by shifting Federal Reserve rate expectations, which also weighed on both bitcoin and gold.

The bank also highlighted Strategy’s outsized role in the market, estimating it has purchased around $13.7 billion worth of bitcoin year-to-date—roughly 70% of total net digital asset inflows—and now holds about 4% of total bitcoin supply.

Given its scale, JPMorgan said Strategy’s dual role as both a buyer and occasional seller creates unnecessary “two-way flow” risk that could amplify volatility. The bank warned that higher volatility could ultimately backfire on the company by raising the cost of raising equity and debt for future bitcoin purchases.

While current bearish sentiment could eventually prove a contrarian bullish signal, JPMorgan said a stronger second half would likely depend on Strategy expanding its cash reserves and on progress in U.S. crypto market structure legislation.