Analyst warns selective sales to fund dividends introduce avoidable volatility
JPMorgan analysts said MicroStrategy’s policy permitting selective bitcoin sales to fund preferred stock dividends has introduced avoidable “two-way” risk into crypto markets, according to a report released July 2.
The Wall Street bank’s analysis, led by analyst Nikolaos Panigirtzoglou, argues that MicroStrategy’s size as a major bitcoin buyer and holder creates unnecessary flow uncertainty. MicroStrategy holds 847,363 BTC, representing 4% of total bitcoin supply, and has purchased $13.7 billion in bitcoin year to date, accounting for 70% of total net digital asset inflows by JPMorgan’s estimate.
MicroStrategy disclosed in a regulatory filing on June 1 that it had sold 32 BTC between May 26 and May 31 to fund dividend payments. The company formalized a policy allowing bitcoin sales to support preferred dividends when appropriate, also authorizing preferred stock repurchases and share buybacks as part of its broader capital structure strategy.
JPMorgan argues the policy creates market risk because investors cannot predict whether MicroStrategy will be a buyer or seller at any given time. “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,” Panigirtzoglou said.
MicroStrategy currently maintains $2.55 billion in cash reserves, providing 17 months of coverage for preferred dividend obligations. The company’s minimum target is 12 months. JPMorgan recommends increasing reserves to 24-36 months through equity issuance rather than bitcoin sales.
The timing of MicroStrategy’s sales coincided with broader weakness in institutional bitcoin demand. Bitcoin came under pressure in late May and early June following MicroStrategy’s disclosure, compounded by repricing of Federal Reserve interest-rate expectations. U.S. spot bitcoin ETFs, the largest source of institutional crypto buying since their 2024 debut, saw record $4 billion in net outflows during June, marking a 13-day redemption streak.
JPMorgan’s concern extends beyond immediate price impact. Greater price volatility could increase the cost of raising equity and debt for MicroStrategy’s future bitcoin purchases, creating a feedback loop that undermines the company’s acquisition strategy.
MicroStrategy Executive Chairman Michael Saylor has positioned the company as a long-term bitcoin holder, but the formalized sales policy introduces uncertainty about that commitment. The dual capacity to buy and sell at scale means market participants must now factor MicroStrategy’s capital needs into trading decisions, adding a layer of complexity to institutional bitcoin positioning.
