Bitwise Sees STRC Selloff as Late-Cycle Deleveraging, Not a Strategy Collapse

Asset manager Bitwise has characterized the sharp decline in Strategy's perpetual preferred stock STRC as a textbook late-cycle leverage unwind, arguing the move reflects where the broader crypto market stands rather than a fundamental threat to Strategy's solvency.

Bitcoin fell below $60,000 in recent days, with STRC breaking from its intended $100 par value as investors grew uncertain about Strategy's commitment to maintaining preferred dividend payments. At the time of publication, Bitcoin was trading around $61,400 and STRC at $88.

Bitwise CIO Matt Hougan addressed the selloff in a Wednesday blog post, writing: 'The volatility in STRC is a natural and important part of the crypto cycle. I think we're nearing the bottom.' Hougan argued that despite the market turbulence, Strategy remains well-capitalized, holding roughly $52 billion in liquid assets against approximately $7 billion in debt.

Earlier this week, Strategy unveiled a revised capital framework that permits selective bitcoin sales to fund preferred dividend payments, authorizes preferred share repurchases and stock buybacks, and establishes a minimum cash reserve sufficient to cover 12 months of preferred dividend and interest obligations. The company's current $2.55 billion cash balance covers approximately 17 months of those payments.

Hougan described Strategy's decision to stop defending STRC's $100 price through automatic rate hikes — and instead allow the security to trade freely while retaining the option to sell bitcoin or repurchase STRC — as a pragmatic response to deteriorating market conditions rather than a sign of distress.

The Bitwise executive also framed the episode as marking a structural shift in Strategy's role in bitcoin markets. The firm is expected to transition away from being crypto's dominant, one-way bitcoin buyer and toward becoming a more flexible capital allocator whose activity depends on prevailing market conditions.

Looking further ahead, Bitwise projected that institutional investors — including asset managers, banks, pension funds, endowments, and sovereign wealth funds — are poised to replace Strategy as bitcoin's primary source of demand in the next market cycle.

On the broader market dynamic, Bitwise described the STRC volatility as consistent with the leverage unwinds that typically occur during the late stages of every crypto cycle. As speculative excess exits the system, the market moves closer to forming a durable bottom, though the firm noted that precise timing remains unpredictable.

Not all Wall Street commentary has been as measured. JPMorgan said Strategy's new policy of allowing selective bitcoin sales to fund preferred dividends introduces avoidable two-way risk, raising uncertainty and contributing to market volatility. The bank's concerns stand in contrast to Bitwise's more constructive reading of the same policy shift.