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- JPMorgan has sounded an alarm that shows risks risk in MicroStrategy’s Bitcoin bets.
- The banking giant believes MicroStrategy’s exposure can trigger a sustained price crash for BTC.
American banking giant JPMorgan Chase is sounding a note of caution to investors regarding the consistent accumulation of Bitcoin (BTC) by MicroStrategy Incorporated. In an investor note published recently, JPMorgan analysts believe the more than $2 billion injected into Bitcoin over the past 6 months may trigger a more sustained correction when the coin chooses to cool down from its current rally.
The Scary MicroStrategy Accumulation
Despite branding itself as a business intelligence and software firm, MicroStrategy has also earned a rare reputation for being the highest corporate holder of Bitcoin. According to a prior report by Crypto News Flash, MicroStrategy recently made a purchase of 3,000 BTC, an accumulation it complemented with the 12,000 BTC earlier this month for $821.7 million.
This second purchase drove its cumulative Bitcoin holdings to 205,000 BTC, securing its spot as one of the largest holders of the coin. To achieve its goals of capitalizing on Bitcoin, MicroStrategy always issues Convertible Senior Notes, a debt offering to finance its purchases.
To JPMorgan analysts, this approach is risky as it adds more leverage to the company’s already fragile position.
“We believe debt-funded Bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and raise the risk of more severe deleveraging in a potential downturn in the future,” JPMorgan analysts wrote.
This comment from JPMorgan is coming at a time when the price of Bitcoin is picking historic All-Time Highs (ATH). Over the past week, Bitcoin price jumped above the $73,000 price mark in accordance with Crypto News Flash’s prior coverage. The banking giant believes MicroStrategy is playing a major role in amplifying the current growth in the price of Bitcoin after turning itself into a leveraged bet for BTC.
Despite the warnings from JPMorgan and other critics, Michael Saylor, the founder and Chairman of MicroStrategy has unveiled the company’s plans to keep up with its buying strategy forever. This position is strengthened seeing MicroStrategy’s profit from its Bitcoin purchases has doubled, pushing it closer to the S&P 500 as formerly reported by Crypto News Flash.
Current Bitcoin’s Correction: Signal or Coincidence?
In line with its strategy, MicroStrategy has revealed it plans to issue another $500 million in Senior Convertible Notes, an offering that can easily be converted into the company’s shares.
This offering coincides with a slip in the price of Bitcoin as it dropped below $70,000 for the first time since it breached and formed support around the price point on March 11. This price trend gives a hint into the warnings from JPMorgan and though the current slump is considered a mild correction, the banking believes the risk of a MicroStrategy-induced crash cannot be ruled out.
At the time of writing, Bitcoin’s price is changing hands for $67,971.63, up by 0.63% in the past 24 hours and by more than 30% over the past month. At current valuation, the coin’s trading volume and market capitalization comes in at $49,690,099,260 and $1,336,589,810,098 respectively.
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