Foreign media: Bitwise Chief Investment Officer Matt Hougan believes that, as deleveraging spurred by Strategy’s STRC product continues, Bitcoin may be approaching the bottom of this phase. The article’s core assessment is that the demand structure previously driven by a single major buyer is changing; for the market to rebound going forward, the dominant force may shift toward broader institutional capital.
STRC decline triggers deleveraging
STRC is a perpetual preferred stock product launched by Strategy, designed to deliver higher yields while maintaining a value close to $100 per share. Hougan noted that Strategy has raised approximately $10.5 billion through this instrument, with part of the proceeds used to further increase its Bitcoin holdings.
However, after Bitcoin and MSTR stock prices weakened in tandem, STRC experienced a significant decline last week, falling to around $75. According to Barron’s, the product touched a historic low of $73.62, prompting market participants to question whether Strategy can continue to cover its preferred dividend payments.
Strategy: Adjust capital allocation
In response to market pressures, Strategy this week raised its annualized dividend for STRC to 12% and approved a share repurchase program of up to $2 billion across common and preferred shares. The company also introduced new capital management arrangements permitting the sale of Bitcoin when needed to bolster reserves, fulfill dividend and debt obligations, and fund share repurchases.
According to reports, Strategy has also approved up to $1.25 billion in Bitcoin sell authorizations to bolster its reserves. This suggests that the market’s previously familiar role of a “consistent one-way buyer” may be changing. Hougan believes that Strategy may no longer necessarily remain the world’s most dominant one-way Bitcoin buyer in the future.
The next round may be carried forward by institutional investors.
However, Hougan does not believe Strategy is close to being forced to sell its coins. He stated that the company currently has sufficient assets to cover its debt and preferred stock obligations, and balance sheet pressures would not materialize unless Bitcoin prices fall further significantly and remain low for an extended period.
He compared this correction to the disappearance of the premium in the Grayscale Bitcoin Trust following the 2019 to 2021 bull market. In his view, such structured products attract significant capital into Bitcoin during upward phases, but can also lead to a painful reset when the support weakens.
Hougan expects that if the next round of Bitcoin price increases occurs, the driving force will come more from banks, asset management firms, pension funds, endowment funds, sovereign wealth funds, and financial advisors, rather than continuing to rely on purchases by individual corporations.
The market is watching for signs of a bottom.
The article also noted that after the weaker-than-expected U.S. employment data for June, risk appetite briefly rebounded, pushing Bitcoin briefly above $62,000. Reuters reported that the month saw only 57,000 new jobs added, below market expectations, which helped lift U.S. stocks and weaken the dollar, as traders reduced their bets on further Fed policy tightening.
- Has the MSTR stock price fallen below the value of its Bitcoin holdings?
- Is the Crypto Fear and Greed Index showing an extreme reading?
- Has the funding rate turned negative?
Hougan said that it is difficult to definitively confirm the market bottom at this moment, but STRC's deleveraging suggests that this cycle may have entered its final stage, paving the way for a new Bitcoin rally this fall.