- Published on
Bitwise
- Authors
- Name
- DeepHorus
Bitwise CIO: Strategy's Bitcoin Dominance Wanes After STRC Turmoil
Bitwise chief investment officer Matt Hougan said that Strategy's era as the dominant Bitcoin buyer may have ended following last week's STRC turmoil, which cast doubt on the company's Bitcoin-buying strategy and sent Bitcoin to a nearly two-year low. '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 stated on Thursday. He predicted that Strategy will become 'less important' in the next Bitcoin cycle, as investment banks, asset managers, pensions, and sovereign wealth funds are expected to take over as primary demand drivers.
The STRC incident involved Strategy's main perpetual preferred stock offering, Stretch (STRC), which broke sharply from its $100 par value to below $75, fueling fears that its dividend model was unsustainable. This coincided with Bitcoin falling to a 21-month low of $58,190 on June 25, further rattling crypto market confidence. In response, Strategy committed to selling Bitcoin where necessary to fund dividends and expanded its US dollar reserve to $2.55 billion, easing immediate concerns but weakening its position as the industry's most aggressive Bitcoin buyer.
Hougan described the STRC collapse as 'classic end-of-cycle dynamics' and likened it to the 2021 implosion of Grayscale's GBTC premium. 'Money searching for high yields and low volatility was used to buy Bitcoin, which offers neither,' he explained. 'This money never really fit Bitcoin. And so, it needs to be cleared out before we can find a bottom.' He emphasized that such financial engineering was always a questionable fit for the volatile cryptocurrency.
However, Strive CEO Matt Cole argued that the media attention on Strategy's STRC issue was overblown and had unnecessarily depressed Bitcoin's price. Speaking with NovaDius Wealth Management president Nate Geraci on Thursday, Cole noted that Strategy's 847,363 Bitcoin represents only 4% of the total supply. He pointed out that by SEC standards, a 4% stake is not considered material—the threshold for materiality is 5%.
Despite the STRC concerns, Hougan reassured that Strategy faces no liquidity risk. The company holds $52 billion in liquid assets against $7 billion of debt, meaning Bitcoin would need to drop another 70% (to about $18,500) to pose a threat. He also noted that if Strategy sold its Bitcoin today, it could cover dividends from STRC and other perpetual preferred stock offerings for the next 28 years.
Looking ahead, Hougan still expects Strategy to be a 'net buyer' in the next bull run, but its influence will be diminished. The STRC incident marks a shift, with institutional players likely to fill the gap as the primary source of Bitcoin demand. As the crypto market recalibrates, the focus turns to whether new investors can sustain the momentum that Strategy once drove.
