JPMorgan Sounds Alarm Over MicroStrategy’s $20 Billion BTC Buying Spree
JPMorgan issued a warning regarding MicroStrategy’s $2 billion purchase of Bitcoin (BTC) over the past six months. The organization emphasizes that MicroStrategy’s Bitcoin buying spree could accelerate any potential downturn, posing a major risk to the stability of the crypto market.
JPMorgan Issues Warning Against MicroStrategy’s Bitcoin Acquisition
“We believe debt-financed Bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and increase the risk of more severe deleveraging in a potential future downturn,” JPMorgan wrote in a recent investor note.
MicroStrategy purchased $821 million worth of Bitcoin between February 26 and March 10 after selling $1.2 billion in convertible bonds earlier this year. These senior convertible bonds issued by MicroStrategy are considered debt securities and can be converted into shares of the company.
During the current crypto bullish run, BTC rose above its all-time high of $73,800 before falling to around $67,100. So JPMorgan’s concerns underscore the market’s fragility. The organization added: “The sale of convertible notes suggests that the company has also played a role in strengthening the rally, as it appears to have turned itself into a leveraged bet on Bitcoin.”
Under the leadership of Bitcoin enthusiast Michael Saylor, MicroStrategy has continued its aggressive pursuit of purchasing Bitcoin. This marks a strategic shift towards becoming a “Bitcoin development company”.
Moreover, MicroStrategy currently owns 205,000 Bitcoins worth approximately $14.7 billion, making it the leading private owner of the largest cryptocurrency. Meanwhile, JPMorgan’s warning coincides with CEO Jamie Dimon’s anti-Bitcoin rhetoric as the organization noted the potential risks of MicroStrategy’s Bitcoin acquisition.
Also Read: Bitcoin ETF Inflow Drops 80% to $133 Million as BTC Price Declines
BTC Price Dropped to $67,000
Bitcoin price rose as high as $73,836 on March 14 before dropping significantly today. At the time of writing, the BTC price fell 6.77% to $67,788.10 on Friday, March 15. On the other hand, the market value of crypto was $1.33 billion. On the contrary, BTC’s 24-hour trading volume increased by 91.58% to $85.95 billion.
Amid such market sentiment, JPMorgan’s warning serves as a crucial reminder. Moreover, if their analysis turns out to be correct, further declines can be expected. The recent decline in Bitcoin price is linked to the increase in inflation rates, which is reflected in the Producer Price Index (PPI), especially reported by the US.
In February, PPI, which covers raw material costs that determine sales prices, increased by 0.6%, exceeding the forecast 0.3%. Additionally, this unexpected inflation spike is likely to be under close scrutiny at the Fed’s March meeting.
Additionally, a significant liquidation event is also cited as another factor contributing to the decline in BTC price. Coinglass data reveals that $282.54 million was liquidated in the last 24 hours, of which $225.40 million was from long positions. This significant liquidation further increases downward pressure on Bitcoin’s value.
Also Read: Crypto Price Prediction: “Buy the Bottom” Mood Rises as BTC Drops Below $70K
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