JPMorgan: Strategy's New Policy Introduces Two-Way Risk to Bitcoin Market

JPMorgan notes that Strategy allows selling Bitcoin to pay preferred stock dividends, introducing "two-way capital flow risk" to the market.
(Previous context: Strategy announces "Digital Credit Framework" authorizing BTC monetization, MSTR and STRC surge nearly 10% pre-market)
(Background supplement: Spot Bitcoin ETF saw record outflows of $4.06 billion in June, institutional demand collapse shocks market)

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• From "only buy, never sell" to flexible two-way operations
• JPMorgan: 2 to 3 years is the reasonable buffer
• Bitwise CIO also turns bearish: Strategy's role has changed
• Implications for the market

In a report released Wednesday evening, JPMorgan noted that Strategy founder Michael Saylor's adjustments to the company's financing model are changing the supply-demand dynamics of the Bitcoin market. This company, long one of Bitcoin's largest buyers, may also become a seller in the future.

From "only buy, never sell" to flexible two-way operations

The report points out that Strategy's newly implemented policy allows the company to sell a portion of its Bitcoin holdings as needed to pay preferred stock dividends and optimize the balance sheet. JPMorgan believes this arrangement introduces an avoidable "two-way capital flow risk" to the market.

According to details, Strategy's Bitcoin monetization plan permits the sale of up to $1.25 billion worth of Bitcoin for reserve replenishment, preferred stock dividend payments, and stock buybacks. The company currently holds approximately $2.55 billion in cash reserves, covering about 17 months of dividend expenses.

JPMorgan: 2 to 3 years is the reasonable buffer

JPMorgan believes Strategy should increase its cash reserves to a coverage level of 24 to 36 months to reassure investors that the company will not need to sell Bitcoin in the foreseeable future. The report emphasizes that market confidence will only truly stabilize when Strategy has sufficient liquidity to cover preferred stock dividend payments for the next two to three years.

"This means the market needs to see Strategy holding a larger cash buffer, not just 17 months," JPMorgan analysts stated in the report.

Bitwise CIO also turns bearish: Strategy's role has changed

Meanwhile, Bitwise Chief Investment Officer Matt Hougan also shared his views on Tuesday, pointing out that Strategy's role in the Bitcoin market has fundamentally changed. He noted that for years, Strategy was the world's core buyer of Bitcoin, continuously providing bullish demand to the market, but this era of one-way accumulation has likely come to an end.

Hougan emphasized that the current mechanism will not force Strategy to sell billions of dollars worth of Bitcoin annually. If Bitcoin enters a bull market, Strategy will likely return to a net buying position. "However, in the next cycle, its influence on the Bitcoin market will be far less than in the previous one."

Implications for the market

As the largest holder of approximately 4% of the Bitcoin supply, Strategy's financing strategy adjustment means the supply-demand logic of the Bitcoin market is undergoing structural changes. In the past, the market could expect Strategy to only buy and never sell, but now it must account for the company's simultaneous buying and selling operations, increasing the potential for short-term volatility.

JPMorgan's analysis also echoes recent market trends—on July 2, spot Bitcoin ETFs saw a single-day net outflow of 6,165 BTC, and Bitcoin prices saw a total outflow of over $4.06 billion in June, setting a monthly record. The decline in institutional demand, combined with the strategic shift of the largest holder like Strategy, constitutes the new reality of the Bitcoin market.