Bitwsie Chief Investment Officer: STRC Plunge Is a Bottom Signal, Bull Market Expected to Begin in Autumn

Original author: Matt Hougan, Chief Investment Officer at Bitwise

Original translation: Chopper, Foresight News

Last week, the price of Bitcoin fell below $60,000, hitting a new low for 2024. There are many reasons for this decline, but the core trigger was the perpetual preferred stock STRC issued by Strategy.

I've received many questions from clients about STRC and MSTR. Given that they can reflect the current cycle phase we are in, I'd like to address them here.

What is STRC?

STRC is a preferred stock product launched by Strategy last year, designed to provide investors with high yield while maintaining a stable price at or near its $100 par value.

At the initial issuance, STRC offered an annualized dividend yield of 9%. To defend the $100 target price, the company publicly stated that if the market price fell below $100, it would increase the dividend by 0.25%–0.5%. Higher yields would attract buying, pushing the price back towards its $100 par value.

This mechanism worked initially. Strategy gradually raised the dividend to 11.5%, and STRC's stock price hovered around $100 for a long time. The high-yield, seemingly risk-free product was widely sought after. Investors poured a total of $10.5 billion into STRC, and the company used all the proceeds to increase its Bitcoin holdings.

In recent weeks, as Bitcoin and MSTR's stock price weakened together, the market began to worry about Strategy's ability and willingness to pay the STRC dividends. The price of STRC plummeted, reaching as low as $75.

Is investor panic justified?

Yes and no.

From an overall balance sheet perspective, the company's fundamentals are very solid: it holds $49.6 billion in Bitcoin, $2.6 billion in cash, with total liabilities of $6.8 billion and total preferred stock of $15.5 billion. If it were to liquidate all its Bitcoin right now, the proceeds would be sufficient to cover all dividend payments for the next 28 years.

However, the core dispute is whether the company will choose to suspend dividend payments. Strategy has the right to unilaterally pause STRC dividends; dividends are merely accrued, with no mandatory payment obligation currently. As Bitcoin continues to decline, the market fears that the company's cash flow will be under pressure and that it might halt dividends at any time, thus fueling panic.

Did the company ultimately suspend dividends?

No.

This Monday, Strategy announced a new operational framework: the company will opportunistically sell some Bitcoin specifically to cover dividend payments. At the same time, it will no longer raise dividends to defend the $100 par value, allowing STRC to float freely. Additionally, the company may repurchase STRC in the secondary market.

Following the announcement, both MSTR and STRC stock prices rebounded significantly.

Why doesn't Strategy simply raise dividends to support the price?

The magnitude of the dividend increase required to bring the price back to the $100 par value is now prohibitively high.

The company's initial plan was to fine-tune interest rates to stabilize the price. But when STRC fell to $75, the market's actual yield had already reached 15.4%. To restore the price to par value by raising the yield, the nominal dividend rate would need to be significantly increased from 11.5% by nearly 4 percentage points to 15.4%.

Even if they raised the dividend, the effect might not be ideal. A sharp increase in dividends would exacerbate market doubts about how the company can sustain such high payouts, potentially triggering another round of selling.

The distance from the $75 price to the $100 par value is too great to be bridged by raising dividends in the short term.

Under the new framework, can STRC return to $100?

Not necessarily. The company is no longer using a mechanistic approach to anchor the $100 stock price. Although the official dividend has been raised to 12%, STRC is unlikely to return to $100 unless Bitcoin's price experiences a significant rally.

What does this series of changes mean?

Market opinions are deeply divided, but in my view, Strategy's role in the Bitcoin market has fundamentally changed.

For years, it was the world's largest buyer of Bitcoin, continuously providing one-way buying pressure. That phase has likely ended. Going forward, the company will dynamically buy and sell Bitcoin based on market conditions, and will no longer be a buyer only.

It's important to clarify: I don't believe Strategy will engage in massive selling. There are no forced clauses compelling the company to liquidate billions of dollars of Bitcoin annually. If a Bitcoin bull market emerges, Strategy will likely turn into a net buyer again.

However, in the next cycle, Strategy's influence on Bitcoin's price action will be far less than in the previous one.

Who will replace Strategy as the biggest incremental buyer of Bitcoin?

Institutional capital.

Throughout Bitcoin's history, the dominant buyers have continuously evolved: cypherpunks, Asian investors, US retail investors, the GBTC trust, and MSTR have successively held the baton. The key incremental driver for the next bull run, I believe, will be various types of institutional capital – global banks, asset managers, pension funds, endowments, sovereign wealth funds, and independent financial advisors. They hold the world's largest pool of capital.

Many signals already confirm this trend. Morgan Stanley recently launched its own Bitcoin ETF; Wells Fargo included Bitcoin in its standard asset allocation model; last year, Texas became the first US state to establish a strategic Bitcoin reserve; several sovereign funds and state-level banks have allocated to Bitcoin or initiated related research projects. Although Bitcoin ETFs saw outflows in 2026, they have accumulated over $50 billion in net inflows since their launch in 2024, and major wealth management platforms have all listed related products.

Is there a risk of liquidation or a margin call for Strategy?

Based on available data, absolutely not. All the liquidation and crash theories are financially illogical. As mentioned earlier, the company has $52 billion in liquid assets against only $7 billion in total debt. Bitcoin would need to fall by over 70% and stay low for an extended period before the company faces an existential crisis.

Market skeptics argue that the pressure to redeem over $15 billion in preferred stock is a long-term negative. However, in an extreme scenario, the company could choose to suspend preferred stock dividends, making the risk manageable.

What does this reveal about the current market phase?

The volatile swings in STRC, coupled with the pullback in MSTR's stock price, are classic signs of a late-cycle phase. In all financial markets, including crypto, the logic of bull-bear cycles is highly consistent. First comes a bull market; then, investors get greedy and pile on leverage, leading to the creation of numerous financial derivatives; a risk event triggers a market reversal; after the market clears and flushes out excess leverage, the bottom truly forms.

STRC is a quintessential product of the financial leverage in this cycle. Capital seeking stable, high yields flowed into STRC, and the company used that money to buy Bitcoin. Simply put, capital that desired low-volatility, stable returns ultimately flowed into a highly volatile asset like Bitcoin.

This type of capital was inherently mismatched with Bitcoin's asset characteristics. It must be fully cleared out before the market can find its bottom, and that process is currently underway.

Crypto market history has seen an identical script. During the 2019–2021 bull run, the GBTC trust traded at a significant premium to its underlying Bitcoin NAV for a long time. Institutions could subscribe for GBTC at par, lock it up for six months, and then sell it in the secondary market at a 20%–50% premium. This allowed massive capital to flow into Bitcoin, spawning various complex financial instruments. Starting in 2021, the trust premium quickly evaporated, the leveraged instruments unwound, and the market subsequently bottomed.

This cycle will likely follow the same path.

When will the market bottom?

I can't give an exact time, and no one can accurately predict the bottom. It can only be clearly identified in hindsight.

However, we can focus on a few leading signals that the bottom is near. First, MSTR's stock price falling below its Net Asset Value (NAV), trading at a discount – this would represent a shift from extreme greed to extreme fear, a clear sign of a nearing bottom. Second, the Crypto Fear & Greed Index plunging to historical extremes, entering the 'extreme fear' zone, which would indicate a moment ripe for positioning. Third, Bitcoin futures funding rates turning consistently negative, with retail traders overwhelmingly short, signaling a deeply pessimistic market sentiment.

To put it simply: the market needs to become extremely pessimistic before the catalyst for a reversal can emerge.

The market is currently in the process of clearing out. The cascading volatility triggered by STRC is a necessary part of the cycle. Every crypto cycle goes through this painful but necessary deleveraging phase.

As the market continues to adjust and clear, I firmly believe the bottom is close at hand, and a new bull market will begin this autumn.