At the moment, MicroStrategy has over $14.7 billion worth of Bitcoin.
JPMorgan issued a warning to investors about possible threats to the Bitcoin market as a result of MicroStrategy acquiring Bitcoin.
Due to a number of reasons, including the explosive PPI report from Thursday, bitcoin fell 7% today.
Regarding MicroStrategy’s recent $2 billion Bitcoin (BTC) purchases made within the last six months, JPMorgan released a caution. The group stressed that MicroStrategy’s Bitcoin buying binge could hasten any impending decline, which presents a serious threat to the stability of the cryptocurrency market.
JPMorgan Issues A Warning Regarding MicroStrategy’s Purchase of Bitcoin
“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 stated in a recent investor note.
After selling $1.2 billion in senior convertible notes earlier this year, MicroStrategy spent $821 million on Bitcoin between February 26 and March 10. MicroStrategy issued these senior convertible notes, which are convertible into company shares and are regarded as debt securities.
BTC hit an all-time high of almost $73,800 during the current bullish run in cryptocurrencies before falling to about $67,100. Therefore, JPMorgan’s worries highlight how vulnerable the market is. The group went on, “The sale of convertible notes indicates that the company has contributed to the rally by seemingly transforming itself into a leveraged bet on Bitcoin.”
MicroStrategy has persisted in its aggressive acquisition strategy of Bitcoin under the direction of Bitcoin enthusiast Michael Saylor. This is a tactical change that will help the company become a “Bitcoin development company.”
Furthermore, MicroStrategy is the largest private holder of Bitcoin, with 205,000 of the cryptocurrency valued at almost $14.7 billion. However, JPMorgan’s caution, which emphasised the possible dangers of MicroStrategy’s Bitcoin acquisition, is consistent with its CEO Jamie Dimon’s anti-Bitcoin message.
Bitcoin Drops To $67,000
On March 14, the price of Bitcoin reached a height of almost $73,836 before sharply declining today. The price of Bitcoin fell by 6.77% to $67,788.10 at the time of publishing on Friday, March 15. At the same time, the cryptocurrency’s market value was $1.33 billion. Conversely, the 24-hour volume of Bitcoin trades surged by 91.58% to $85.95 billion.
In the midst of these market sentiments, JPMorgan’s caution is an important lesson. JPMorgan’s analysis points to a potential $62 billion Bitcoin ETF market, using gold as a benchmark. However, their study also suggests further price decline for Bitcoin if inflation keeps rising, as evidenced by the recent surge in the US Producer Price Index (PPI).
The PPI, which includes the costs of raw materials that determine selling prices, increased by 0.6% in February compared to the forecast 0.3% increase. Moreover, the Federal Reserve will probably be closely monitoring this surprise spike in inflation during their meeting in March.
The price of Bitcoin is also said to have declined as a result of a noteworthy liquidation event. According to Coinglass data, $282.54 million were liquidated, of which $225.40 million resulted from long holdings held during the previous day. The substantial liquidation adds to the already downward pressure on the price of Bitcoin.
