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Bitwise Chief Investment Officer: STRC Major Drop is a Bottom Signal, Bull Market to Start in Autumn

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After Bitcoin fell below $60,000, Strategy Perpetual Preferred Stock (STRC) became the catalyst for the market downturn. The article analyzes the sharp decline of STRC, Strategy's new framework, and its impact on the Bitcoin cycle, institutional fund takeover, and market bottom signal.

Original Title: STRC, MSTR, and End-of-Cycle Dynamics
Original Author: Matt Hougan, Chief Investment Officer at Bitwise
Translation: Chopper, Foresight News

Last week, the price of Bitcoin fell below $60,000, hitting a new low since 2024. The primary trigger for this round of decline was the issuance of perpetual preferred stock STRC by Strategy.

I have received many client inquiries about STRC and MSTR. Given that they can reflect the stage of the cycle we are currently 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 returns while maintaining price stability close to a face value of $100.

At the product's launch, STRC had an annualized dividend yield of 9%. To maintain the $100 target price, the company stated that if the market price fell below $100, the dividend would be increased by 0.25%-0.5%. Higher returns would attract buyers, driving the price back to the $100 face value.

This mechanism did work initially. Strategy gradually increased the dividend to 11.5%, and the STRC price remained around $100 in the long term. The high return, seemingly low-risk product was widely popular, with investors collectively investing $10.5 billion in STRC, and the company using all the funds raised to buy more Bitcoin.

In the past few weeks, both Bitcoin and MSTR stock prices have weakened simultaneously, and the market has begun to worry about whether Strategy has the ability and willingness to pay out STRC dividends. As a result, the STRC price plummeted, dropping to a low of $75.

Is Investor Panic Justified?

Yes and no.

Looking at the overall balance sheet, the company's fundamentals are very strong: holding $49.6 billion in Bitcoin, $2.6 billion in cash, total liabilities of $6.8 billion, and preferred shares totaling $15.5 billion. If all Bitcoin were sold off at the current price, the proceeds would be enough to cover all dividend payments for the next 28 years.

However, the key disagreement lies in whether the company will choose to suspend dividend payments. Strategy has the right to voluntarily suspend STRC dividends; the dividends are merely accrued and there is no immediate obligation to pay them out. With Bitcoin continuing to fall, the market is concerned about the company's cash flow pressure and the potential dividend suspension, leading to escalating panic.

Has the Company Finally Suspended Dividends?

Not yet.

On Monday of this week, Strategy announced a new operational framework: the company will opportunistically sell a portion of its Bitcoin holdings specifically to fund dividend payments. At the same time, the company will no longer maintain a $100 face value for STRC by raising dividends, allowing STRC to freely float in price; additionally, the company may engage in STRC buybacks in the secondary market.

Following the announcement, both MSTR and STRC prices saw a significant rebound simultaneously.

Why Didn't Strategy Adjust Dividends Directly to Maintain the Price?

If aiming to bring back the $100 face value, the required dividend adjustment would have been so high that it would have been unsustainable.

The company's initial plan was to make minor interest rate adjustments to stabilize the stock price. However, when STRC fell to $75, the market's actual yield had already reached 15.4%. In order to restore the face value through a dividend increase, the nominal dividend rate would need to be raised significantly by nearly 4 percentage points from 11.5% to 15.4%.

Even with an interest rate hike, the effect may not be ideal. A substantial increase in dividends would intensify market concerns: how would the company sustainably pay such high dividends, potentially triggering a new round of sell-offs.

With the price at $75 being significantly below the $100 face value, short-term recovery through interest rate hikes is insufficient.

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

Not necessarily. The company no longer relies on mechanistic means to anchor the $100 stock price; although the official dividend has been raised to 12%, only a significant increase in the price of Bitcoin would allow STRC to return to $100.

What Do These Changes Signify?

There are divergent views in the market, but in my opinion, Strategy's role in the Bitcoin market has fundamentally changed.

For many years, it has been the world's largest Bitcoin buyer, continuously providing one-way buying pressure to the market. This phase has likely come to an end. In the future, the company will buy and sell Bitcoin dynamically based on market conditions, no longer just buying.

It is important to note: I do not believe Strategy will engage in large-scale selling. There are no mandatory terms forcing the company to liquidate billions of dollars worth of Bitcoin annually; once Bitcoin enters a bull market, Strategy will likely return to being a net buyer.

However, in the next cycle, Strategy's influence on the Bitcoin market will likely be far less than in the previous cycle.

Who Will Succeed Strategy as Bitcoin's Biggest Incremental Buyer?

Institutional Funds.

Throughout Bitcoin's development, the market's dominant buyers have iterated continuously: cypherpunks, Asian investors, U.S. retail traders, GBTC Grayscale Trust, and MSTR have successively taken the lead. I judge that the core increment of the next bull market will be various types of institutional funds—global banks, asset managers, pension funds, endowments, sovereign wealth funds, independent financial advisors—holding the world's largest pools of capital.

Many signals have already confirmed this trend. Morgan Stanley recently launched its own Bitcoin ETF, Wells Fargo has included Bitcoin in its standard asset allocation model; last year, Texas became the first state in the U.S. to establish a strategic Bitcoin reserve; several sovereign wealth funds and national banks have allocated to Bitcoin or initiated related research projects. Although Bitcoin ETFs experienced outflows in 2026, net inflows since their launch in 2024 have exceeded $50 billion, and mainstream financial platforms have all launched related products.

Does Strategy Pose a Liquidation and Margin Call Risk?

Based on existing data, this risk does not exist at all, and various discussions about liquidation cascades do not align with financial logic. As mentioned earlier, the company's current assets total $52 billion, with total debt of only $7 billion. Bitcoin would need to plummet by over 70% and sustain a low level for an extended period to put the company in a survival crisis.

Market skeptics believe that the redemption pressure from over $15 billion of preferred stock is a long-term bearish factor, but in extreme situations, the company can choose to suspend preferred stock dividends, mitigating the risk.

What Does This Reflect About the Current Market Phase?

The violent fluctuations of STRC coupled with the MSTR stock price correction are typical characteristics of the end of a cycle. All financial markets, including the crypto market, follow a highly unified bull-bear cycle logic: first, a bull market emerges; then, investors become greedy and leveraged, with a plethora of financial derivatives coming into play; risk points appear in the market, leading to a reversal; after the market is cleared, squeezing out all excess leverage, the true bottom will finally emerge.

STRC is the typical product of financial leverage in this cycle: funds seeking stable high returns flow into STRC, and the company then uses this money to buy Bitcoin. In simple terms, a batch of funds seeking low-volatility stable returns ultimately flowed into the highly volatile Bitcoin asset.

These funds are inherently mismatched with the properties of Bitcoin assets and must complete their exit for the market to discover the bottom, and we are currently undergoing this process.

The crypto market has previously seen the exact same storyline. During the 2019–2021 bull market, the GBTC trust was consistently priced at a significant premium to the underlying Bitcoin net value. Institutions could purchase GBTC at par, lock it up for six months, and then sell at a 20%–50% premium in the secondary market, channeling massive funds into Bitcoin, leading to various complex financial tools. Starting in 2021, the trust premium evaporated rapidly, and various leveraged tools departed en masse, followed by the market hitting rock bottom.

The current market trend is highly likely to replicate the same pattern.

When Will the Market Bottom Out?

I cannot provide an exact time. No one can consistently predict the bottom, and it can only be clearly identified in hindsight.

However, we can focus on several leading indicators of a bottom: First, MSTR's stock price falling below Net Asset Value (NAV) creating a discount trade, signaling a shift in market sentiment from greed to extreme fear, a clear indicator of an impending bottom; second, the Cryptocurrency Fear and Greed Index dropping to historical lows, entering the extreme fear zone, indicating a good entry point; third, the Bitcoin perpetual contract funding rate remaining negative, with retail shorts far exceeding longs, showing the market sentiment is extremely pessimistic.

In short: A market reaching extreme pessimism is a prelude to a reversal opportunity.

The market is currently in a process of liquidation, and the cascading effect caused by STRC is an essential part of the cycle. Every crypto cycle goes through this painful but necessary deleveraging phase.

As the market continues to undergo a purge adjustment, I firmly believe that the bottom is imminent, and a new bull market will begin this fall.