Bitwise Chief Investment Officer Matt Hougan published an analysis Wednesday arguing that the sharp selloff in Strategy's perpetual preferred stock STRC reflects the final stages of a leveraged crypto cycle rather than a structural threat to the company or to Bitcoin.
STRC broke from its intended $100 par value and fell to $75 as Bitcoin dropped below $60,000 last week, hitting its lowest level since 2024. The move triggered widespread concern about Strategy's ability to sustain preferred dividend payments. Bitcoin hit a 21-month low of $58,190 on June 25.
"The volatility in STRC is a natural and important part of the crypto cycle. I think we're nearing the bottom," Hougan wrote.
Strategy responded Monday by announcing a capital framework that allows the company to sell Bitcoin periodically to fund dividend obligations, while also authorizing preferred share repurchases. The company raised STRC's annual dividend rate to 12% and set a minimum cash reserve requirement covering 12 months of preferred dividend and interest payments. Its current $2.55 billion cash balance provides approximately 17 months of coverage.
Why Strategy abandoned the $100 price defense
STRC launched with a 9% yield and a mechanism designed to increase that yield by 0.25% to 0.50% whenever the share price fell below $100. The structure attracted $10.5 billion from investors, and Strategy used the proceeds to purchase Bitcoin. The yield climbed gradually to 11.5% through incremental adjustments.
The mechanism broke when the gap between STRC's trading price and its $100 target exceeded what a yield adjustment could bridge. With STRC at $75, the effective yield already implied by the market stood at 15.4%, meaning Strategy would have needed to raise the nominal yield by nearly 4 percentage points.
"At $75, STRC's $100 'par value' was too far gone to save in the short-term," Hougan wrote.
A rate increase of that scale was more likely to amplify fears about Strategy's ability to sustain higher payouts than to restore confidence in the par price.
Hougan dismissed concerns about the company's financial stability. Strategy holds approximately $49.6 billion in Bitcoin and $2.6 billion in cash against $6.8 billion in debt.
"The liquidation conspiracy theories seem to defy math," he wrote. "Bitcoin would have to trade down massively (70%+) and stay there for multiple years to put the company at risk."
If Strategy sold its Bitcoin at current prices, Hougan said the proceeds would cover 28 years of preferred dividends.
The GBTC parallel Hougan drew
Hougan framed the STRC episode as structurally similar to the Grayscale Bitcoin Trust premium collapse that preceded the 2021 cycle correction. During the earlier period, institutional investors created GBTC shares at net asset value, held for six months, and sold into a secondary market at premiums that often ranged between 20% and 50%. The premium attracted large capital flows and produced leverage that the market had to unwind.
STRC followed the same basic logic. Investors who sought high yield and low volatility placed capital with Strategy, which converted it into Bitcoin purchases, an asset that offers neither quality.
"Money searching for high yields and low volatility was used to buy Bitcoin, which offers neither," Hougan wrote. "This money never really fit Bitcoin. And so, it needs to be cleared out before we can find a bottom. That's what's happening today."
JPMorgan said Strategy's new policy, which permits Bitcoin sales to fund dividends, creates "avoidable two-way risk" and increases uncertainty and market volatility.
Strategy as dominant Bitcoin buyer: Hougan says that era is ending
The new capital framework shifts Strategy from a one-way source of Bitcoin demand to a participant that may buy or sell depending on conditions. Hougan said that change marks a durable shift in the company's market role.
"For years, Strategy has been the most dominant Bitcoin buyer in the world and a one-way source of Bitcoin demand. Those days are likely over," Hougan said.
"I just expect it to be a less important figure in Bitcoin in the next cycle than it was in the last," he added.
Hougan named institutional investors as the most likely successors to Strategy as the primary demand driver. Spot Bitcoin ETFs have drawn more than $50 billion since their 2024 launch and now carry approval on most major financial advisor platforms, while Morgan Stanley launched proprietary Bitcoin ETFs. Texas became the first US state to fund a strategic Bitcoin reserve, and multiple sovereign wealth funds and central banks have either committed to Bitcoin holdings or announced formal research programs.
Strive CEO says the concern is overblown
Strive CEO Matt Cole offered a different view on the STRC incident's significance. Speaking with NovaDius Wealth Management president Nate Geraci, Cole said the media attention pulled down Bitcoin's price by more than the underlying situation warranted.
Cole pointed to Strategy's 847,363 Bitcoin as context, noting the position represents approximately 4% of the cryptocurrency's total fixed supply.
"If one person owned 4%, you don't even have to report that publicly to the SEC because the SEC deems 4% to be immaterial. They start to view a position to be material at 5%," Cole said.
Bitcoin traded near $61,400 and STRC at $88 at the time of Hougan's publication.
Gunel Ismayilova
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