Bitwsie Chief Investment Officer: STRC Plunge is Bottom Signal, Bull Market to Start in Autumn
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Bitwsie Chief Investment Officer: STRC Plunge is Bottom Signal, Bull Market to Start in Autumn
STRC's sharp volatility is a normal and crucial part of the crypto market cycle.
Navigating Web3 tides with focused insightsWritten by: Matt Hougan, Chief Investment Officer at Bitwise
Compiled by: Chopper, Foresight News
Last week, the price of Bitcoin fell below $60,000, hitting a new low since 2024. There are many reasons for this decline, but the core trigger was the perpetual preferred stock STRC issued by Strategy.
I have received many questions from clients about STRC and MSTR. Given that they reflect the current stage of the cycle we are in, I would 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 yields while maintaining a price stable at or close to the par value of $100.
In the early stage of the product launch, STRC had an annual dividend rate of 9%. To defend the $100 target price, the company stated publicly: if the market price falls below $100, the dividend will be increased by 0.25%–0.5%. Higher yields will attract buying pressure, pushing the price back to the $100 par value.
This mechanism indeed worked in the early stage. Strategy gradually increased the dividend to 11.5%, and the STRC stock price hovered around $100 for a long time. The high-yield, seemingly zero-risk product was widely sought after; investors cumulatively invested $10.5 billion into STRC, and the company used all the raised funds to add to its Bitcoin positions.
In the past few weeks, Bitcoin and MSTR stock prices weakened simultaneously. The market began to worry about whether Strategy had the ability and willingness to pay STRC dividends. The STRC price plummeted in response, falling to a low of $75.
Is Investors' Panic Justified?
Yes and no.
From the perspective of the overall balance sheet, the company's fundamentals are very solid: it holds $49.6 billion worth of Bitcoin, $2.6 billion in cash, total liabilities of $6.8 billion, and preferred stock totaling $15.5 billion. If all Bitcoin were sold off now, the proceeds would be sufficient to cover all dividend expenditures for the next 28 years.
But the core divergence lies in whether the company will choose to suspend dividend payments? Strategy has the discretionary right to suspend STRC dividends; dividends are merely accrued, with no mandatory payment constraint at present. As Bitcoin continues to fall, the market worries that the company's cash flow will be under pressure and dividends could be halted at any time, fueling panic.
Did the Company Ultimately Suspend Dividends?
No.
This Monday, Strategy announced a new operational framework: the company will sell some Bitcoin at opportune times, specifically to pay dividends. At the same time, the company will no longer maintain the $100 par value by increasing dividends, allowing STRC to float freely; additionally, the company may repurchase STRC in the secondary market.
After the announcement, MSTR and STRC stock prices rebounded significantly in sync.
Why Didn't Strategy Directly Increase Dividends to Support the Price?
If it wanted to pull back to the $100 par value, the magnitude of the dividend increase required would already be unbearably high.
The company's initial plan was to stabilize the stock price with small adjustments to the rate, but when STRC fell to $75, the market's actual yield had already reached 15.4%. To repair to par value by raising rates, the nominal dividend rate would need to increase significantly by nearly 4 percentage points from 11.5% to 15.4%.
Even if rates were raised, the effect might not be ideal. Significantly raising dividends would exacerbate market doubts: what will the company rely on to continue paying high dividends, which could instead trigger a new round of selling.
The price of $75 is too far from the $100 par value; relying on rate hikes in the short term is powerless to recover it.
Under the New Framework, Can STRC Return to $100?
Not necessarily. The company no longer relies on mechanized means to anchor the $100 stock price; although the official dividend was increased to 12%, only if the Bitcoin price sees a significant increase is it possible for STRC to return to $100.
What Do These Changes Mean?
Market opinions vary greatly, but in my view, Strategy's role in the Bitcoin market has changed completely.
For many years, it was the largest Bitcoin buyer globally, continuously providing one-way buying pressure to the market. This stage has likely come to an end. Going forward, the company will buy and sell Bitcoin dynamically based on market conditions, no longer only buying and not selling.
It needs to be emphasized: I do not believe Strategy will sell off on a large scale. There are no mandatory clauses forcing the company to liquidate billions of dollars worth of Bitcoin annually; once Bitcoin enters a bull market, Strategy will likely turn into a net buyer again.
It is just that in the next cycle, Strategy's influence on Bitcoin market trends will be far less than in the previous one.
Who Will Succeed Strategy as the Largest Incremental Buyer of Bitcoin?
Institutional capital.
In the development process of Bitcoin, the main market buyers have continuously iterated: cypherpunks, Asian investors, U.S. retail investors, GBTC Grayscale Trust, MSTR sequentially took over dominance. For the core incremental volume of the next market trend, I judge it will be various institutional funds — global banks, asset managers, pension funds, endowments, sovereign wealth funds, independent financial advisors, they hold the largest pool of capital globally.
Many signals have already confirmed 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 U.S. state to establish a strategic Bitcoin reserve; multiple sovereign funds and national-level banks have allocated Bitcoin or launched related research projects. Although Bitcoin ETFs saw capital outflows in 2026, cumulative net inflows since their launch in 2024 to present have exceeded $50 billion, and mainstream wealth management platforms have all launched related products.
Does Strategy Face Liquidation Risk?
Based on existing data, it absolutely does not exist; various liquidation crash arguments do not align with financial logic. As mentioned earlier, the company's total liquid assets are $52 billion, and total debt is only $7 billion. Bitcoin would need to plummet by more than 70% and remain at low levels for a long time to put the company into a survival crisis.
Market skeptics believe the redemption pressure of over $15 billion in preferred stock is a long-term bearish factor, but in extreme cases, the company can choose to suspend preferred stock dividends, making the risk controllable.
What Stage of the Current Market Does This Reflect?
The violent volatility of STRC combined with the MSTR stock price pullback is a typical characteristic of the end of a cycle. All financial markets, including the crypto market, have highly unified bull-bear cycle logic: first, a bull market emerges; subsequently, investors greedily add leverage, and a large number of financial derivative tools emerge; risk explosion points appear in the market, and the trend reverses; only after the market clears out and squeezes out all excess leverage will the bottom truly appear.
STRC is a typical product of financial leverage in this cycle: funds pursuing stable high yields flooded into STRC, and the company then used this money to buy Bitcoin. Simply put, a batch of funds pursuing low-volatility stable returns ultimately flooded into the highly volatile Bitcoin asset.
This type of capital is inherently mismatched with Bitcoin asset attributes; it must complete its exit and clearance before the market can probe the bottom, and we are currently undergoing this process.
Exactly the same plot has played out in the history of the crypto market. During the 2019–2021 bull market, the GBTC trust long traded at a significant premium to the underlying Bitcoin net asset value. Institutions could subscribe to GBTC at par, lock up positions for half a year, and then sell off in the secondary market at a 20%–50% premium; massive funds flooded into Bitcoin through this mechanism, deriving various complex financial tools. Starting in 2021, the trust premium disappeared rapidly, various leverage tools withdrew en masse, and the market bottomed out accordingly.
This market trend will likely replicate the same path.
When Will the Market Bottom Arrive?
I cannot give an exact time; no one can accurately predict the bottom, it can only be clearly confirmed in hindsight.
But we can focus on tracking several pre-bottom signals: First, MSTR stock price falls below net asset value (NAV) trading at a discount, representing market sentiment shifting completely from greed to extreme panic, which is a clear signal of approaching the bottom; Second, the Crypto Fear and Greed Index falls to historical extremes, falling into the extreme panic zone, at which point it has value for positioning; Third, Bitcoin contract funding rates remain continuously negative, retail shorting willingness far exceeds longing, and market sentiment is completely pessimistic.
Simply summarized: only when the market falls to extreme pessimism will the opportunity for reversal appear.
Currently, the market is in the process of clearing out; the chain reaction volatility triggered by STRC is a necessary part of the cycle. Every crypto cycle will experience this painful but necessary deleveraging phase.
As the market continues to clear and adjust, I firmly believe the bottom is imminent, and a new bull market will begin this autumn.
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