JPMorgan analysts say the market should keep a closer eye on MicroStrategy’s balance sheet than on the recent pickup in bitcoin selling from miners. In a new report, the bank argues that the company’s ability to hold its bitcoin reserves is playing a bigger role in shaping bitcoin’s short-term price direction than shifts in mining activity.
According to managing director Nikolaos Panigirtzoglou and his team, bitcoin has been under pressure for two main reasons. The first is the recent drop in the network hashrate and mining difficulty. The second is growing concern around MicroStrategy, the world’s largest corporate holder of bitcoin.
The decline in mining metrics reflects two key forces. China has reiterated its ban on bitcoin mining after an increase in private activity, and higher-cost miners outside China are scaling back as lower bitcoin prices and elevated energy costs squeeze profitability. While a drop in hashrate would normally lift miner revenue, JPMorgan notes that bitcoin is trading below its estimated production cost, creating more selling pressure.
The bank now estimates bitcoin’s production cost at 90,000 dollars, down from 94,000 dollars a month earlier. That figure assumes electricity at 0.05 dollars per kilowatt hour. Each one-cent increase lifts production cost by about 18,000 dollars for higher-cost producers. As margins tighten, some miners have already offloaded bitcoin to stay afloat.
Even so, JPMorgan says miners are not the main story. MicroStrategy’s finances, and its signal to the market that it can avoid forced sales, may be more influential in the near term.
One metric the analysts monitor is the company’s enterprise-value-to-bitcoin-holdings ratio. It currently sits at 1.13 after a sharp decline in the second half of the year. Because it remains above 1, the bank views the reading as a positive sign that MicroStrategy is not under pressure to liquidate bitcoin to cover dividends or interest. The firm has also built a 1.44 billion dollar cash reserve, which could support two years of obligations. This reduces the odds of forced selling and helps steady bitcoin’s outlook.
MicroStrategy has slowed its pace of accumulation in recent weeks, including what may have been a brief pause, but the company continues to grow its holdings and recently crossed 650,000 bitcoin in its treasury.
The next catalyst is MSCI’s upcoming decision on whether to remove MicroStrategy and other digital asset treasury companies from its equity indices. JPMorgan says the risk of removal appears “already more than priced in.” Since the index provider launched its consultation in October, MicroStrategy shares have fallen 40 percent and underperformed bitcoin by about 20 percent, equal to roughly 18 billion dollars in market value. The analysts say this performance suggests markets have already factored in potential exclusion.
Earlier estimates suggested MSCI removal could trigger about 2.8 billion dollars in outflows from MicroStrategy, or 8.8 billion dollars if other major indices followed. Even so, the bank believes any official removal on January 15 would likely bring limited additional downside. If MSCI decides to keep the stock in its indices, both MicroStrategy and bitcoin could rebound toward their pre-October levels.
JPMorgan notes that if bitcoin falls below its 90,000 dollar production-cost estimate for a long stretch, more miners could face pressure and costs may fall further. Historically, production cost has served as a soft support level for bitcoin’s price.
Despite recent turbulence, the bank maintains a positive longer-term view. Its volatility-adjusted comparison of bitcoin and gold points to a theoretical price near 170,000 dollars over the next 6 to 12 months, assuming markets stabilize. Bitcoin is currently trading around 92,340 dollars.
