JPMorgan: MicroStrategy's Bitcoin holding ratio is "safe," concept stocks more resilient than miners

A report by JPMorgan’s analyst team led by Nikolaos Panigirtzoglou points out that the balance sheet resilience of MicroStrategy (MSTR), the leading Bitcoin proxy stock, has a greater influence on Bitcoin’s recent price action than miner selling pressure. MicroStrategy’s enterprise value to Bitcoin holdings ratio currently stands at 1.13, remaining above the safety line of 1.0, indicating the company is unlikely to face pressure to sell Bitcoin to pay dividends or interest.

MicroStrategy’s 1.13x Ratio Becomes Bitcoin’s Lifeline

(Source: Leverage Shares)

JPMorgan analysts note that MicroStrategy’s enterprise value to Bitcoin holdings ratio (calculated as the total market value of debt, preferred shares, and equity divided by the market value of its Bitcoin holdings) is currently 1.13, after a significant drop in the second half of this year. The ratio remaining above 1 is described as “encouraging,” as it means MicroStrategy is unlikely to be pressured into selling Bitcoin to meet dividend or interest payments.

What does this 1.13x ratio mean? It indicates that MicroStrategy’s total enterprise value (including equity market cap, debt, and preferred shares) is 13% higher than the market value of its Bitcoin holdings. In other words, the market is giving MicroStrategy a 13% valuation premium. This premium reflects market recognition of MicroStrategy’s management capability, financing power, and strategic execution.

If this ratio falls below 1.0, it means MicroStrategy’s enterprise value is less than its Bitcoin holdings, putting the company theoretically in an “insolvent” state (though in reality, Bitcoin is an asset, not a liability). More importantly, a ratio below 1.0 would seriously weaken MicroStrategy’s ability to raise funds, as investors would not want to buy shares or bonds at a price below net asset value. Once financing ability is lost, MicroStrategy may be forced to sell Bitcoin to pay maturing debt or dividends, which would exert huge selling pressure on Bitcoin’s price.

The analysts wrote: “If this ratio stays above 1.0 and MicroStrategy ultimately avoids selling Bitcoin, the market may be reassured and the worst for Bitcoin’s price may be over.” This statement directly links MicroStrategy’s financial health to Bitcoin’s price outlook, highlighting the systemic importance of this Bitcoin proxy stock to the entire crypto market.

Three Critical Scenarios for MicroStrategy’s Enterprise Value Ratio

Ratio > 1.2: MicroStrategy enjoys a high premium, strong financing ability, can continue buying Bitcoin

Ratio 1.0-1.2: Premium narrows but remains positive, status quo maintained, neither buying nor selling

Ratio < 1.0: Negative premium crisis, loss of financing ability, may be forced to sell Bitcoin

The current 1.13 ratio is in a relatively safe zone, but with only a 13% buffer from the danger line of 1.0. If Bitcoin’s price falls further or MicroStrategy’s share price continues to be under pressure, the ratio may drop below 1.0, triggering concerns over forced selling. Therefore, closely monitoring the ratio’s movement has become a key indicator for judging Bitcoin’s short-term trend.

$1.44 Billion Reserve Builds Two-Year Firewall

(Source: Bloomberg, JPMorgan)

Analysts specifically pointed out that MicroStrategy recently established a $1.44 billion reserve, enough to pay dividends and interest for up to two years. They said this reserve further reduces the likelihood of forced Bitcoin selling “for the foreseeable future,” helping stabilize Bitcoin’s outlook. This $1.44 billion USD reserve is the most critical risk buffer in MicroStrategy’s capital strategy.

Why such a large reserve? MicroStrategy’s business model relies heavily on ongoing financing. The company raises funds to buy Bitcoin by issuing convertible bonds and preferred shares, which require regular interest and dividend payments. If the company lacks sufficient dollar reserves, it would have to sell Bitcoin to meet these obligations, violating its “never sell Bitcoin” core strategy.

A two-year buffer means that even if Bitcoin prices stay depressed during this period, MicroStrategy will not be forced to sell. This financial resilience is hard for other crypto proxy stocks to match. Many Bitcoin mining companies face immediate cash flow pressure during price drops, forcing them to sell newly mined Bitcoin to cover electricity and operating costs. In contrast, MicroStrategy can wait patiently for Bitcoin prices to recover.

JPMorgan’s analysis highlights MicroStrategy’s unique position as a Bitcoin proxy stock. It is not an ordinary company passively holding Bitcoin, but a deliberately designed Bitcoin leverage vehicle. Its success hinges on meticulous capital structure management: aggressively raising funds to buy Bitcoin in good markets, relying on reserves to weather downturns, and never being forced to sell at unfavorable prices.

MicroStrategy has recently slowed its pace of Bitcoin accumulation, and there may have been weeks without any new purchases. Nevertheless, the company continues to expand its Bitcoin reserves and earlier this week announced its holdings have exceeded 650,000 BTC. At the current Bitcoin price of around $92,000, this stash is worth nearly $60 billion, making MicroStrategy the world’s largest corporate holder of Bitcoin.

Miner Selling vs Proxy Stock Support: Who Drives the Price

JPMorgan analysts believe that Bitcoin’s recent price pressure is mainly driven by two factors. The first is the recent decline in Bitcoin network hashrate and mining difficulty, reflecting China’s renewed mining ban and the retreat of high-cost miners as profit margins are squeezed. The second factor is developments around MicroStrategy as the main crypto proxy stock.

Declining hashrate and lower mining difficulty should benefit remaining miners, as less competition means higher Bitcoin rewards per unit of hashrate. However, analysts state, “Bitcoin’s price continues to linger below its production cost,” causing the world’s first and largest cryptocurrency to face selling pressure.

JPMorgan currently estimates Bitcoin’s production cost at $90,000, down from $94,000 last month. The updated estimate assumes an electricity price of $0.05 per kWh; analysts estimate that for every $0.01 per kWh increase, high-cost producers’ production cost rises by $18,000. The report notes: “Due to rising electricity costs and falling Bitcoin prices squeezing profit margins, some high-cost miners have been forced to sell Bitcoin in recent weeks.”

However, JPMorgan’s core argument is: miners are not the main driver of Bitcoin’s next move. Instead, they believe MicroStrategy’s balance sheet and its ability to avoid selling Bitcoin are the key. This judgment is based on MicroStrategy’s unique role in the Bitcoin ecosystem: as the largest corporate holder and most active buyer, its buying and selling behavior has a decisive impact on market supply and demand.

Miners’ daily selling is predictable and already priced in by the market. But if MicroStrategy were to suddenly start selling hundreds of thousands of Bitcoin, it would be an unanticipated “black swan” event. Therefore, ensuring MicroStrategy is not forced to sell is crucial to maintaining Bitcoin’s price stability.

The Deep Logic of “Fully Priced In” MSCI Exclusion Risk

The market is now closely watching whether MSCI will remove MicroStrategy and other Digital Asset Technology (DAT) companies from its stock indices. JPMorgan says the impact of such a move could be “asymmetric,” with limited downside for the stock as the risk has been “fully priced in.”

Since October 10, when MSCI first announced a consultation, MicroStrategy’s share price had dropped 40% by December 2, underperforming Bitcoin’s 20% decline, with its market cap shrinking by about $18 billion. Analysts believe such a steep drop indicates the market has already priced in the impact of MicroStrategy being dropped by MSCI—or even potentially by all major indices.

Last month, JPMorgan estimated that MSCI index exclusion would cause $2.8 billion in fund outflows from MicroStrategy, and if all other stock indices follow suit, the outflow could reach $8.8 billion. At the time, MicroStrategy co-founder and executive chairman Michael Saylor said, “Index classification does not define us. Our strategy is long-term, and our conviction in Bitcoin is unwavering.”

Analysts said the MSCI decision on January 15 will be crucial for both MicroStrategy and Bitcoin’s trends. But they reiterated that a negative decision may limit further downside for Bitcoin, as the negative impact has already been priced in. Conversely, if MSCI keeps MicroStrategy in its indices, both the proxy stock and Bitcoin “could rebound strongly” to levels seen before October 10.

Analysts say if Bitcoin’s price falls below its revised estimated production cost of $90,000 and remains there for an extended period as it did in 2018, more miners will come under pressure and the estimated production cost may drop further. Historically, production cost has served as a “soft floor” or support. Nevertheless, analysts reaffirmed Bitcoin’s long-term upside potential, with volatility-adjusted analysis still showing a theoretical price near $170,000.