Strategy policy raises Bitcoin sale concerns

• JPMorgan said Strategy's new policy allowing selective Bitcoin sales introduces additional market risk.
• The bank said Strategy's shift from a consistent buyer to a potential seller could affect cryptocurrency market flows.
• JPMorgan recommended Strategy strengthen its cash reserves to reduce the likelihood of future Bitcoin sales.

Strategy introduced a policy allowing selective sales of its 847,363 Bitcoin (CRYPTO:BTC) holdings to fund preferred dividend payments and share buybacks, prompting JPMorgan to warn that the change could add new risks to the cryptocurrency market.

JPMorgan said Strategy accounted for about 70% of net digital asset inflows this year, making its purchasing activity an important source of market demand, while the new policy means the company could also become a seller if required.

“Strategy, once among Bitcoin’s most reliable buyers, now poses a new uncertainty for the market as it positions itself to sell if necessary,” JPMorgan analysts led by Nikolaos Panigirtzoglou said.

JPMorgan said Strategy's US$2.55 billion cash balance covers preferred dividend and interest payments for about 17 months, but argued that issuing common shares to extend cash coverage to between 24 and 36 months would provide greater confidence that Bitcoin sales could be avoided.

Benchmark Equity Research maintained its buy rating and US$570 price target on Strategy following the announcement, saying the revised capital framework gives the company greater financial flexibility, while Strategy shares rose 12.6% to US$92.68 and STRC gained nearly 10% to about US$83.67 after the news.

Formerly known as MicroStrategy, Strategy has become the world's largest corporate holder of Bitcoin through an acquisition strategy funded by equity and debt offerings.

The company's Bitcoin treasury strategy has made it one of the most closely watched institutional participants in the cryptocurrency market, with investors monitoring both its capital raising activity and the impact of its purchases on Bitcoin demand.

At the time of reporting, Bitcoin price was $61,305.57.