JPMorgan has warned that Strategy's plan to sell bitcoin could increase price volatility in the cryptocurrency market.

On July 3, blockchain media outlet CoinPost reported that JPMorgan analysed Strategy's formalised "bitcoin monetisation programme" as potentially bringing unnecessary two-way risks to the market.

Under the programme, Strategy can sell bitcoin to secure up to $1.25 billion in additional dollar reserves and use the funds for preferred stock dividends, corporate bond interest payments and share buybacks. Strategy sets a minimum cash-holding target of 12 months for the dividends and interest payments. As of June 28, its reserves were $2.55 billion, equivalent to about 17 months.

JPMorgan said that level would be unlikely to quell market concerns. Nikolas Panigirtzoglou (니콜라오스 파니기르초글루), a managing director who led the report, argued it would be better to increase reserves further by issuing common stock even if it dilutes shareholder value. He said cash balances sufficient to cover 24 to 36 months of dividend and interest payments would be needed so investors do not worry about near-term bitcoin sales.

The market impact is large because of Strategy's holdings. Strategy holds 847,363 BTC, about 4 percent of bitcoin's total supply. The amount spent on bitcoin purchases this year is $13.7 billion, about 70 percent of net inflows into the overall digital asset market as estimated by JPMorgan.

JPMorgan said the situation in which a company of that scale can become both a large buyer and seller in the market itself creates additional two-way risks. It judged that if volatility rises, the cost of issuing Strategy's shares and corporate bonds would increase, and its ability to make additional bitcoin purchases in the future could ultimately weaken.

Strategy disclosed on June 1 that it sold 32 BTC from May 26 to 31 and used the proceeds to fund preferred stock dividends. The market perception spread that a company that "keeps buying" had moved to selling, and bitcoin prices fell. The selling pressure was stronger at the time as it coincided with a period when expectations for U.S. Federal Reserve rate cuts retreated.

Institutional fund flows were also weak. U.S. spot bitcoin exchange-traded funds recorded net outflows for 13 consecutive trading sessions in June as outflows expanded. Monthly net outflows reached $4 billion, the largest on record, and cumulative net inflows since the start of the year also turned negative.

JPMorgan presented two conditions for a market recovery in the second half. They were that Strategy increases its reserves to cover 24 to 36 months and that the U.S. Clarity bill is enacted. JPMorgan's analysis team added that if these conditions are met, the current weak sentiment could shift into a "bullish contrarian signal."

Another view also emerged. Grayscale's research unit said that rather than raising preferred dividend rates, selling more than $3 billion of bitcoin to cover two years of cash payment obligations could be more helpful in restoring market confidence. That is why Strategy's funding structure and bitcoin holding strategy are emerging as key variables for the cryptocurrency market in the second half.

The key point in this matter is that Strategy has been singled out not just as a large buyer but also as a source of market volatility. It showed that the scale of its bitcoin holdings and its funding structure are directly linked to supply and demand and sentiment across the cryptocurrency market, beyond corporate financial issues.