MicroStrategy's massive debt-fueled bitcoin purchases could make a future downturn worse, JPMorgan says

• MicroStrategy's use of leverage to build its bitcoin trove could deepen a downturn, JPMorgan said. 
• Microstrategy wants to acquire as much bitcoin as possible, founder Michael Saylor has said.
• Mike Novogratz has warned that too much leverage fueling the bitcoin rally could spark a pullback. 

While bitcoin has been smashing to new record highs, a future correction could be made worse by one bullish firm's massive exposure, JPMorgan said in a note. 

"We believe debt-funded bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and raise the risk of more severe deleveraging in a potential downturn in the future," analysts led by Nikolaos Panigirtzoglou wrote on Thursday.

Rising enthusiasm for the token has sent it soaring over $73,000 this week, as newly-formed spot bitcoin ETFs have opened doors to a fresh set of investors. Others are piling in ahead of next month's bitcoin halving, an event that historically boosts the price to new highs. 

But according to JPMorgan, MicroStrategy played no small part in the rally, having essentially transformed itself into a leveraged bet on bitcoin. 

The firm, founded by crypto bull Michael Saylor, has acquired a total of 205,000 bitcoins as of mid-March, a stash now valued at over $14 billion. Building up this trove has become a focal strategy for the company, as Saylor often touts plans to acquire as much bitcoin as possible.

"It's the best investment asset. So the endgame is to acquire more Bitcoin," he recently told Yahoo Finance. "Whoever gets the most Bitcoin wins. There is no other endgame."

According to JPMorgan, MicroStrategy has bought $1 billion of bitcoin this year, adding onto a similar $1 billion purchase in the fourth quarter. To finance these acquisitions, the company has used levered bitcoin investments, Saylor previously explained. 

"We use cheap capital — our average cost of capital is like 1.6%, or something in that range —  and the combination of leverage, and then offering our shareholders a yield," he said in August. 

Now, it's aiming to offer another $500 million of convertible-debt to keep buying up bitcoin, JPMorgan analysts wrote.

Too much leverage in the bitcoin rally has sparked concern for other commentators as well. Though Galaxy CEO and crypto enthusiast Mike Novogratz generally forecasts the token to rise higher, that's not before a correction to around $50,000. 

That's as the new ETFs have attracted a slew of leverage-dependent retail investors, which isn't sustainable.

"I think the market is too leveraged right now. It happens after huge runs," he told Bloomberg TV late last month. "There will be a wash out. People can't sustain this much leverage."