Matt Hougan, Chief Investment Officer at Bitwise, believes that the recent pressure on Strategy’s STRC preferred shares represents an important stage of the current cryptocurrency market cycle. In his view, the move is part of a deleveraging process that usually precedes the formation of a bottom for bitcoin.
The assessment gained momentum after bitcoin fell below US$ 60 thousand at the end of June, reaching its lowest level since 2024. According to Hougan, much of this pressure was linked to STRC’s performance, an instrument created by Strategy to raise funds aimed at expanding its bitcoin reserves.
STRC was launched with a par value of US$ 100 and an initial yield of 9% per year. The structure provided for automatic increases in remuneration whenever the price remained below that value, encouraging investors to keep the asset close to parity.
For several months, this mechanism worked as expected. The yield reached 11,5%, while approximately US$ 10,5 billion was raised, allowing Strategy to significantly expand its bitcoin purchases.
However, the drop in bitcoin and MSTR shares raised concerns about the company’s ability to maintain dividend payments. As a result, STRC lost the US$ 100 reference point and was traded near US$ 75.
Hougan considers that these concerns have merit, but believes the market overreacted. According to his calculations, Strategy has approximately US$ 49,6 billion in bitcoin and US$ 2,6 billion in cash, while totaling about US$ 6,8 billion in debt and US$ 15,5 billion in preferred shares. This equity would be sufficient to sustain decades of payments if the company chose to liquidate part of its reserves.
In the executive’s assessment, the main factor of uncertainty was never the company’s financial capacity, but rather its decision to continue distributing dividends, since payment can be suspended at Strategy’s own discretion.
On 29 June, the company announced relevant changes to STRC’s structure. From now on, it may sell small amounts of bitcoin periodically to finance dividends and has stopped automatically increasing the remuneration rate to defend the US$ 100 price.
After the announcement, both MSTR shares and STRC posted a recovery. For Hougan, raising the yield even further would send a negative message to the market, especially because, with the security traded near US$ 75, the effective return had already reached approximately 15,4%.
The Chief Investment Officer also believes that Strategy will cease to be the main continuous buyer of bitcoin. Instead, the company may alternate periods of buying and selling according to market conditions, without the need for major liquidations of its reserves.
In the executive’s view, the next demand cycle should be driven by institutional investors. Among the factors cited are bitcoin ETFs distributed by Morgan Stanley, the inclusion of bitcoin in Wells Fargo model portfolios, the Texas strategic bitcoin reserve, and the more than US$ 50 billion accumulated in inflows into bitcoin ETFs since 2024.
Comparing the current moment with previous cycles, Hougan said that the unwinding of STRC resembles the end of the premium traded by GBTC in 2021. According to him, moves of this kind eliminate excessively leveraged structures and usually occur before the market recovers.
Regarding the current moment, Hougan summarized his perception by stating: "I think we are approaching rock bottom." He added that he monitors indicators such as MSTR’s discount relative to net asset value, the Crypto Fear and Greed Index, and bitcoin funding rates to identify signs of a possible trend change in the coming months.