Private Blockchains Are Bigger Bitcoin Risk Than Strategy BTC Sales, JPMorgan

JPMorgan analysts have said Bitcoin’s main long-term risk may not come from Strategy selling BTC, but from banks and large institutions adopting private blockchain systems that do not rely on public crypto networks or tokens.

JPMorgan Says Strategy Sales Are Not the Main Bitcoin Threat

In a note to clients, JPMorgan analysts, led by Nikolaos Panigirtzoulos, suggested that Strategy’s Bitcoin sales could introduce periodic selling pressure, but they did not view the company as the primary structural threat for Bitcoin. After years of accumulation, strategy has come into the control of about 4% of all bitcoins in circulation, so traders are watching strategy’s moves very closely.

“Strategy is not our primary thinking as a structural threat to Bitcoin,” the analysts wrote. The bigger danger is from the traditional finance sector’s adoption of blockchain technology outside of the public permissionless networks like Bitcoin and Ethereum, they said.

Recently, Strategy has moved into a formal Bitcoin Monetization Program, leading to a debate about how corporate treasuries may add two-way flow risk to the market. Such sales, according to JPMorgan, were “avoidable” from the large holder, who can influence the sentiment and liquidity when they sell.

The latest note pointed out, however, that those sales are no longer a primary concern. The analysts said tokenisation, the payment and settlement process, could be heading towards “permissioned systems” run by banks, the clearing industry, and regulated market operators.

Banks Push Permissioned Rails and Tokenized Deposits

JPMorgan cited its own blockchain platform, Kinexys, as an example of institutional usage not on public blockchain networks. The permissioned rail provides transfers from institutional clients and has facilitated over $4 trillion in cumulative transaction volume.

The analysts argued that private blockchain systems are preferred by the banks, as they provide identity checks, privacy controls, governance, legal accountability and regulatory certainty. Those features make permissioned networks more attractive for regulated firms that need clear operating rules.

Tokenized deposits are one area JPMorgan identified as a possible challenge for public blockchain-based stablecoins. These deposits are bank money on blockchain-like platforms and are still bound by the existing banking regulations, deposit security and customer interactions.

The analysts stated that more tokenized deposits may mean less use of stablecoins for institutional payments and settlement. The central bank digital currency projects and SWIFT’s blockchain endeavours could also enable regulated options, they added.

The note also raised the question about the direction of institutional capital in the current real-world asset tokenization market, which is valued at approximately $50 billion. At this moment, the use of Ethereum may be “early experimentation” instead of a permanent model, JPMorgan said.

CLARITY Act May Not Solve Bitcoin’s Structural Risks

If the CLARITY Act is passed later this year, it could offer more clarity on the rules for digital assets, but it is unclear if it will address the broader issues of Bitcoin, according to JPMorgan analysts. They said regulatory clarity could also help banks issue tokenized deposits faster.

The analysts wrote that permissioned networks can set the framework for regulated finance, whereas public chains can be utilized primarily for distribution, restricted trading, and connectivity. This perspective questions whether the use of public blockchain will fully realize the institutional adoption values.

JPMorgan said its outlook could change if public and private chains develop side by side, stablecoins grow under clearer rules, or Bitcoin continues to trade mainly as digital gold.

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