JPMorgan's "two pressures" and strategy resilience

While monetary easing remains a major influence, the key to Bitcoin and the cryptocurrency market may not be miners, but the balance sheet of US Strategy, the world's largest Bitcoin treasury company.

According to a J.P. Morgan report, there are two major factors contributing to Bitcoin's recent decline. The first is a decline in the Bitcoin network's hash rate and mining difficulty. The second is developments at Strategy, the largest holding company.

China's renewed emphasis on its ban on private mining, coupled with rising global electricity costs, has led to high-cost miners withdrawing from the market. While China still accounts for a significant portion of the global hash rate, the tug-of-war between tightening regulations and underground mining continues.

As a result, mining difficulty has temporarily declined, and mining costs are estimated to have fallen to around $90,000. This is seen as the "cost floor," a value at which the cost of mining Bitcoin tends to act as a price floor.

However, the report placed greater emphasis on Strategy's financial resilience than on the miners. Strategy's enterprise value-to-BTC holdings ratio (mNAV) remained just over 1x even after the sharp drop, meaning its enterprise value remains above its BTC holdings.

If this ratio were to fall below 1, the market would shift to the logic that "it would be more rational to buy stocks rather than sell Bitcoin," causing a sudden deterioration in corporate financing conditions. To that end, the company has increased its dollar reserves by $14 billion for dividend and interest payments, creating a structure that can withstand up to two years of cash outflows.

Meanwhile, an equity index provider (Morgan Stanley Capital International) is in discussions about whether to exclude "digital asset treasury companies" like Strategy from its index, which is causing market anxiety.

Taking all these factors into account, JPMorgan concluded that "if mNAV remains above 1 and Strategy can avoid selling Bitcoin, the current downturn may have peaked." In other words, their analysis suggests that the current short-term trend in Bitcoin prices is more dependent on Strategy's financial resilience than on miners'.