JPMorgan analysts warn that MicroStrategy’s new policy allowing Bitcoin sales to fund preferred stock dividends introduces two-way risk and could heighten volatility in the crypto market.

The policy also allows repurchases of its preferred stock and other share buybacks tied to liquidity and dividend funding, potentially enabling ongoing Bitcoin selling or purchases.

Analysts say MicroStrategy’s value is closely tied to Bitcoin’s price, so greater uncertainty could raise the cost of issuing equity and debt to fund more Bitcoin acquisitions.

If conditions improve, the current weak sentiment could reverse, potentially signaling a bullish turn in the second half of the year.

JPMorgan notes a stronger market mood could emerge if MicroStrategy expands its cash reserves and pending crypto-market-structure legislation is enacted by Congress.

A stronger second half for crypto would depend on rebuilding reserves to cover two years of obligations and passing the U.S. market-structure bill, per JPMorgan.

Weak demand for US spot Bitcoin ETFs has led to record outflows in June, with JPMorgan suggesting larger cash reserves and supportive U.S. legislation could stabilize sentiment.

Rising outflows in U.S. spot Bitcoin ETFs compound market pressures related to MicroStrategy’s disclosures and broader rate expectations.

Bitcoin traded near $61,700, while MicroStrategy’s stock has shed about 75% in the past year to around $99.86 per share.

MicroStrategy holds about $2.55 billion in cash, roughly 17 months of obligations, but JPMorgan recommends expanding reserves to 24–36 months to bolster confidence.

Analyst Panigirtzoglou argues a 24–36 month coverage period is needed to reassure investors MicroStrategy won’t need to monetize Bitcoin soon.

The bank says ample liquidity—covering two to three years of dividends—is crucial to prevent forced Bitcoin sales and maintain confidence.