Markets will likely be reassured if this ratio stays above 1.0 and Strategy avoids selling Bitcoin, analysts wrote
Bitcoin News
JPMorgan analysts have identified Strategy's financial resilience as the main driver of Bitcoin near-term direction, outweighing miner activity. The firm's ability to avoid selling Bitcoin matters more than hash rate declines or mining difficulty changes.
Managing director Nikolaos Panigirtzoglou led analysts who cited two pressure factors on Bitcoin's price in a Wednesday report. The Bitcoin network hash rate and mining difficulty declined recently while developments around Strategy's balance sheet drew market attention.
Hash rate and difficulty declines reflect China reiterating its mining ban after private activity surged, plus high-cost miners outside China retreating as prices and energy costs squeeze profits. Bitcoin price continues to hover below production cost, creating sell pressure on the cryptocurrency.
JPMorgan now estimates Bitcoin production cost at $90,000, down from $94,000 last month. The estimate assumes electricity at $0.05 per kilowatt-hour, with each $0.01 increase raising production cost by $18,000 for higher-cost producers.
High-cost miners faced forced Bitcoin sales in recent weeks as profits squeezed amid elevated electricity costs and lower prices. Strategy's enterprise-value-to-Bitcoin-holdings ratio currently stands at 1.13, after declining sharply in the second half of this year.
The ratio remaining above 1.0 is encouraging because it signals Strategy is unlikely to face pressure to sell Bitcoin for dividend or interest obligations. Markets will likely be reassured if this ratio stays above 1.0 and Strategy avoids selling Bitcoin, analysts wrote.
Strategy created a $1.44 billion U.S. dollar reserve that could cover two years of dividend and interest payments. This reserve reduces the likelihood of forced Bitcoin sales in the foreseeable future, helping stabilize the cryptocurrency's outlook.
The firm recently slowed Bitcoin accumulation but continues to build its treasury. Strategy announced this week that its stockpile crossed 650,000 Bitcoin. Markets watch to see whether MSCI will remove Strategy and other digital asset treasury companies from equity indices, with JPMorgan saying the impact would likely be asymmetric.
MSCI exclusion risk appears already priced in, analysts said. Strategy's share price fell 40% through Dec. 2 since MSCI announced its consultation on Oct. 10, underperforming Bitcoin by 20% or roughly $18 billion in market value. If MSCI keeps Strategy in indices, both the stock and Bitcoin will likely rebound strongly toward pre-Oct. 10 levels.
JPMorgan reiterated longer-term upside potential. Their volatility-adjusted comparison of Bitcoin to gold implies a theoretical Bitcoin price near $170,000, suggesting significant appreciation over six to 12 months if market conditions stabilize. Bitcoin currently trades around $91,340.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
