JPMorgan Says Strategy Bitcoin Sale Option Adds Two-Way Market Risk
Summary
- JPMorgan said Strategy’s policy allowing it to sell Bitcoin is increasing unnecessary uncertainty and two-way risk in the cryptocurrency market.
- Strategy formalized a policy allowing selective sales of Bitcoin to pay preferred stock dividends, while also approving preferred share repurchases, stock buybacks and a minimum cash reserve policy.
- JPMorgan said Strategy needs reserves covering 24 to 36 months of obligations to reassure investors, along with a plan to raise additional dollar reserves through common stock issuance if needed.
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JPMorgan said Strategy’s decision to allow potential Bitcoin sales is adding unnecessary uncertainty to the cryptocurrency market.
CoinDesk reported on July 2 that JPMorgan said in a note the policy could create “two-way risk” and increase volatility by allowing Strategy to sell Bitcoin to fund preferred stock dividend payments.
Strategy recently formalized a policy allowing selective Bitcoin sales if needed to pay preferred dividends. It also approved preferred share repurchases and stock buybacks, and set a minimum cash reserve equal to 12 months of preferred dividends and interest expenses. Its current cash holdings of $2.55 billion cover about 17 months of required payments.
JPMorgan wrote that investors are unlikely to be reassured Strategy will not need to sell Bitcoin in the near term unless it holds reserves sufficient to cover 24 to 36 months of obligations. The bank added that the company also needs a way to raise additional dollar reserves through common stock issuance even if its shares trade below net asset value.
JOON HYOUNG LEE
gilson@bloomingbit.ioCrypto Journalist based in Seoul