JPMorgan believes that Strategy currently needs to use its cash reserves to stabilize investor sentiment, rather than simply continuing to increase its Bitcoin holdings. With its core preferred stock, STRC, now valued at over $10 billion, the market is paying closer attention to whether the company has sufficient dollar funds to cover debt and dividend payments.
The sale of 32 bitcoins has sparked concerns.
Strategy previously sold 32 bitcoins, cashing out approximately $2.5 million. While this amount is relatively small compared to its total holdings, it still raised concerns in the market about whether the company would continue to sell bitcoins to pay dividends. Following the announcement, Strategy's stock recorded its worst weekly performance since November 2022.
In its latest report, JPMorgan Chase stated that rebuilding dollar reserves could be key to restoring market confidence. Analysts believe this would help alleviate investor concerns about companies continuing to sell currency to cover cash expenditures.
The company has allocated $1 billion to manage debt and dividends.
Strategy said Monday it has set aside $1 billion for debt management and STRC dividend arrangements. STRC's dividend frequency will also be adjusted to once every two months starting in July. JPMorgan Chase noted that previously, the company's cash reserves were only sufficient to cover slightly more than six months of STRC dividends.
Previously, Strategy had burned through cash by repurchasing debt at a discount, reducing its cash reserves by as much as 61%. Before that, the company's cash buffer reached a peak of $2.25 billion.
Increasing Bitcoin holdings remains a key focus of the market.
Despite the controversy sparked by the small-scale sale of Bitcoin, Strategy subsequently bought $100 million worth of Bitcoin and increased its cash balance. Reports indicate that the company currently holds approximately $53.3 billion worth of Bitcoin, but according to the article's calculations, it still has a paper loss of about $10.7 billion.
JPMorgan Chase also pointed out that a significant portion of the new demand for Bitcoin this year has come from Strategy's continued buying. The company has purchased a total of 171,473 Bitcoins this year, with a total value of approximately $10.9 billion.
- Year-to-date purchases: 171,473 Bitcoins
- Corresponding amount: approximately US$10.9 billion
- Current Bitcoin holdings value: approximately $53.3 billion
Analysts also noted that given Bitcoin's 27% year-to-date decline, the current weak sentiment could itself be a contrarian signal. However, a more positive outlook hinges on Strategy further clarifying how it will cover dividend costs and progress in US crypto legislation.
