MicroStrategy’s rapid rise in market value and continued bitcoin purchases have created risk, even in the portfolios of some investors aiming to ignore crypto altogether, according to JPMorgan. The company, which now calls itself simply Strategy, was the first major firm to transform itself into a bitcoin treasury company. That resulted in a surging stock price and a position in some major market indexes, such as the Nasdaq-100 and the Russell 1000 . JPMorgan strategist Nikolaos Panigirtzoglou cautioned in a note to clients that Strategy’s status in those indexes can cause pain for investors when a downturn comes, and could even scare off some more crypto-friendly investors. He described the company as a “leveraged bitcoin fund.” “The more bitcoin MicroStrategy buys, the higher the bitcoin price, thus inducing even higher market cap and even higher weights in equity indices. This self-reinforcing circle increases the risk of a boom and bust cycle, making MicroStrategy investors less comfortable with buying MicroStrategy stock,” the note said. Even though MicroStrategy is not part of the S & P 500, JPMorgan estimated that close to $50 billion of the investment in the company is tied to its inclusion in indexes, with $21 billion of that coming from passive funds. The risk comes not just from the volatility common to bitcoin, but also Strategy’s valuation. Strategy executive chairman Michael Saylor said in an X post on June 16 that the company now owns 592,100 bitcoin. That amounts to roughly $61 billion, based on crypto market prices as of Friday afternoon. BTC.CM= YTD mountain Bitcoin was trading just below $104,000 on Friday afternoon. While that stash makes Strategy one of the world’s largest bitcoin holders, it is still less than the company’s market cap, which now sits at roughly $103 billion after the stock price surged about 150% over the past year. It would be a stretch to say Strategy’s small software business makes up the rest of that value, as first-quarter revenues were just $111.1 million. Cash flow could also be a concern in the future. Panigirtzoglou said investors who are financing the bitcoin purchases by buying the company’s debt and preferred stock are expecting regular payouts in return that could strain the company’s finances. “The sum of debt and preferred shares now accounts for almost 1/6th of the bitcoin assets held by MicroStrategy. Such high yields are only sustainable if the bitcoin price continues to rise steeply in the future. If the bitcoin price fails to achieve sustained and strong annual appreciation in the future, preferred stock issuance and the MicroStrategy stock price could come under severe pressure,” the JPMorgan note said.