JPMorgan warns Strategy's bitcoin (BTC) sales policy raises crypto market risk

Wall Street bank JPMorgan (JPM) said Strategy's (MSTR) decision to allow selective bitcoin BTC $ 61,618.62 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.