CoinDesk
Bitwise said the sharp decline in Strategy's perpetual preferred stock, STRC, is a hallmark of a maturing crypto cycle rather than evidence of a looming crisis at the company. The asset manager argued Strategy remains fundamentally well-capitalized, with roughly $52 billion in liquid assets against about $7 billion of debt, even as STRC broke from its intended $100 par value during Bitcoin's recent pullback below $60,000.
CIO Matt Hougan told clients in a Wednesday blog post that "the volatility in STRC is a natural and important part of the crypto cycle. I think we're nearing the bottom." Bitcoin was trading around $61,400 at publication time, with STRC at $88. The selloff rattled markets as investors questioned Strategy's willingness to maintain preferred dividend payments, but Bitwise read the move as a classic late-cycle deleveraging event.
Why it matters
Hougan framed Strategy's decision to stop defending STRC's $100 price through automatic rate hikes as a pragmatic response to deteriorating conditions. Earlier this week, Strategy unveiled a capital framework allowing selective bitcoin sales to fund preferred dividends, alongside preferred share repurchases, stock buybacks, and a minimum cash reserve covering 12 months of preferred dividend and interest payments. Its $2.55 billion cash balance currently covers about 17 months of those obligations.
The episode marks a broader shift in Strategy's role within bitcoin markets. Rather than serving as crypto's dominant, one-way buyer, the firm is likely to become a more flexible participant whose purchases or sales depend on conditions. Hougan argued the more durable thesis is institutional replacement: asset managers, banks, pensions, endowments and sovereign funds are positioned to become bitcoin's primary source of demand in the next cycle, not Strategy.
Market impact
STRC's volatility is part of the leverage unwind that typically marks the late stages of every crypto cycle. Speculative excess being flushed from the system brings the market closer to a durable bottom, though the exact timing remains impossible to pin down.
Frequently asked questions
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What did Bitwise say about the STRC selloff?
Bitwise CIO Matt Hougan called STRC's volatility "a natural and important part of the crypto cycle" and said the market is nearing the bottom. He framed the move as a classic late-cycle deleveraging event, not a sign Strategy is heading for liquidation.
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How well-capitalized is Strategy according to Bitwise?
Bitwise said Strategy holds roughly $52 billion in liquid assets against about $7 billion of debt. Its $2.55 billion cash balance covers roughly 17 months of preferred dividend and interest payments under a new 12-month minimum reserve policy.
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What changed in Strategy's capital framework this week?
Strategy unveiled a framework allowing selective bitcoin sales to fund preferred dividends, plus preferred share repurchases and stock buybacks. It also set a minimum cash reserve covering 12 months of preferred dividend and interest payments.
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Why does Bitwise think institutions will take over BTC demand?
Hougan argued Strategy is shifting from a one-way bitcoin buyer to a more flexible, conditions-dependent allocator. Asset managers, banks, pensions, endowments and sovereign funds are now positioned to become bitcoin's dominant source of demand in the next cycle.
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What did JPMorgan say about Strategy's new policy?
JPMorgan warned that allowing selective bitcoin sales to fund preferred dividends creates avoidable two-way risk, increasing uncertainty and market volatility rather than reducing it.
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