Strategy's Bitcoin Era Is Ending?

From Corporate Anchor to Flexible Allocator

Michael Saylor's Strategy has spent years serving as one of the most consistent and visible buyers of $BTC, but Bitwise Chief Investment Officer Matt Hougan believes that era is drawing to a close. Writing in his latest weekly memo, Hougan argued that the recent volatility in Strategy's STRC preferred stock looks like a late-cycle unwind rather than a sign of more serious structural damage.

Bitcoin fell below $60,000 in late June, its lowest level since 2024, a decline Hougan attributed largely to turmoil around STRC, the perpetual preferred equity instrument Strategy uses to help fund its Bitcoin purchases. STRC launched last year targeting a $100 par value and initially paid a 9% yield, with Strategy agreeing to raise that yield by 0.25 to 0.50 percentage points whenever the price drifted below $100. The mechanism worked for a while, with the rate climbing to 11.5% and investors pouring $10.5 billion into the instrument. As Bitcoin and MSTR both fell over the following weeks, however, investors grew doubtful that Strategy could or would continue paying STRC's dividend, and the price broke from par, falling as low as $75.

On June 29, Strategy announced a Digital Credit Capital Framework that formalized a significant shift, including a revised STRC dividend policy set at a 12% annual rate, repurchase programs, and a BTC monetization program authorizing the sale of up to $1.25 billion in Bitcoin. Strategy's new framework effectively shifts MSTR from a one-way Bitcoin buyer to a more flexible capital allocator.

Institutions Set to Take the Lead

Hougan said Strategy's run as Bitcoin's most dominant, one-way buyer is likely over. Going forward, the firm could buy or sell depending on market conditions, though he does not expect large-scale selling, since nothing forces Strategy to sell more than a few billion dollars of Bitcoin a year.

"I think it will be institutions," Hougan noted, pointing to growing participation by banks, asset managers, pension funds, sovereign wealth funds, and financial advisers as the likely next drivers of $BTC demand. He cited Morgan Stanley's proprietary Bitcoin ETFs, Wells Fargo's addition of Bitcoin to model portfolios, Texas's strategic Bitcoin reserve, and more than $50 billion in cumulative Bitcoin ETF inflows since 2024 as evidence of this institutional shift.

On the question of Strategy's financial stability, Hougan was direct. Despite the recent volatility, he maintained that Strategy does not face any meaningful financial distress, writing that "the liquidation conspiracy theories seem to defy math." He noted that Strategy currently holds approximately $49.6 billion in Bitcoin and $2.6 billion in cash, compared with $6.8 billion in debt. "Bitcoin would have to trade down massively (70%+) and stay there for multiple years to put the company at risk," he added.

For markets, the broader takeaway may be less about Strategy's solvency and more about where the next wave of Bitcoin demand comes from. Rather than relying on purchases from one highly visible corporate buyer, Bitcoin demand could become distributed across hundreds of financial institutions managing trillions of dollars in global assets.

Sources:
The Block: Bitwise CIO says Strategy's STRC selloff is part of Bitcoin's end-of-cycle dynamics
CoinDesk: Bitwise says STRC selloff signals crypto market bottom is near
CryptoPotato: Why Bitwise's Matt Hougan thinks Strategy's Bitcoin era is fading