JPMorgan Says Strategy Needs Larger Cash Buffer as Bitcoin Sale Stokes Fears

JPMorgan said Strategy needs to increase its dollar cash holdings to restore investor confidence after its recent Bitcoin sale.

The Block reported on June 7 that a JPMorgan research team led by Managing Director Nikolaos Panigirtzoglou said in a report that Strategy’s latest Bitcoin sale had unsettled the market.

Strategy recently sold 32 BTC. While the amount was minimal relative to its total holdings, JPMorgan said the move undermined the company’s long-standing “Never Sell” image.

JPMorgan said Strategy’s current dollar reserves can cover only about 6.3 months of preferred dividend payments. That has heightened investor concern that the company may sell more Bitcoin to fund future dividend payments.

The bank said the company needs to rebuild its cash reserves. A larger cash buffer would help ease market concern over additional Bitcoin sales and restore investor confidence.

Strategy set aside $1.44 billion in dollar reserves in December last year to pay preferred dividends and interest on debt.

JPMorgan, however, does not see Strategy halting its Bitcoin purchases. If the current pace is maintained, the research team projects the company’s Bitcoin buying will reach about $32 billion this year. That would top the roughly $22 billion recorded in each of 2024 and 2025.

Separately, JPMorgan put the odds that the CLARITY Act, a US crypto market structure bill, will pass this year at below 50%. The bank cited delays in the Senate calendar, debate over stablecoin revenue and political divisions as key variables.

The research team also withdrew its earlier bullish view on the crypto market this year. At the start of the year, it had maintained an overweight rating on expectations of stronger institutional inflows, but has since turned more cautious.

Even so, JPMorgan said the market’s current extreme bearish sentiment could ultimately prove to be a signal of a rebound.