Bitwsie CIO: STRC sharp drop is a bottom signal, bull market will start in autumn.

Written by Matt Hougan, Chief Investment Officer at Bitwise

Compiled by Chopper, Foresight News

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

I’ve received many questions from clients about STRC and MSTR. Since they reflect the cycle stage we are in right now, I want to address them here.

What is STRC?

STRC is Strategy’s preferred stock product launched last year. It was originally designed to offer investors high yields while keeping the price stable—or maintained close to—the $100 par value.

In the early stage of the product’s issuance, STRC’s annualized dividend yield was 9%. To defend the $100 target price, the company said externally that if the market price falls below $100, it would increase the dividend by 0.25%–0.5%. Higher yields would attract buy orders and push the price back to the $100 par value.

This mechanism worked well at first. Strategy gradually increased dividends to 11.5%, and STRC’s share price remained around $100 for a long time. The high-yield, seemingly zero-risk product became widely popular. Investors cumulatively poured $105 billion into STRC, and the company used all the fundraising to add more to Bitcoin.

Over the past few weeks, as Bitcoin and MSTR’s share prices weakened in tandem, the market began to worry whether Strategy would be able—and willing—to pay the STRC dividends. STRC’s price then plunged sharply in response, falling as low as $75.

Is investor panic justified?

Yes, and no.

From 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 the company were to sell all its Bitcoin today, the proceeds would be enough to cover all dividend payments for the next 28 years.

But the core disagreement is whether the company would choose to stop paying dividends. Strategy has the right to voluntarily pause STRC dividends; dividends are only accrued and recorded, with no obligation to redeem them immediately. As Bitcoin continues to fall, the market worries that the company’s cash flow will come under pressure and that it may suspend dividends at any time, which has intensified panic.

Did the company ultimately suspend dividends?

No.

On Monday of this week, Strategy announced a brand-new operating framework: the company will selectively sell some of its Bitcoin when the time is right, using it specifically to pay dividends. At the same time, the official side will no longer maintain the $100 par value by increasing dividends, allowing STRC to trade freely with floating pricing; in addition, the company may also repurchase STRC in the secondary market.

After the announcement, both MSTR and STRC’s share prices rebounded sharply in sync.

Why doesn’t Strategy directly raise dividends to support the stock price?

If the goal is to pull the price back to the $100 par value, the required dividend increase is already too high to be bearable.

The company’s original plan was to make a small adjustment to the interest rate to stabilize the share price. But when STRC fell to $75, the market’s effective yield had already reached 15.4%. To restore the price back to par through a rate hike, the nominal dividend yield would need to jump by nearly 4 percentage points—from 11.5% to 15.4%.

Even if there is a rate hike, the outcome may not be ideal. Raising dividends sharply would intensify market doubts about how the company can continue paying such high dividends, which could actually trigger another round of selling.

With the price at $75, the gap to the $100 par value is too large, and in the short term, relying on dividend hikes alone is powerless to reverse it.

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

Not necessarily. The company will no longer rely on mechanized methods to anchor the $100 share price. Although the official dividend has been increased to 12%, STRC can only potentially return to $100 if Bitcoin’s price rises significantly.

What do these changes mean?

There is a lot of disagreement in the market, but in my view, Strategy’s role in the Bitcoin market has been completely changed.

For many years, it has been the world’s largest Bitcoin buyer, continuously providing one-way buying pressure to the market. That phase is very likely over. Going forward, the company will dynamically buy and sell Bitcoin based on market conditions, no longer only buying and never selling.

It’s important to emphasize this: I don’t believe Strategy will massively sell off. There are no mandatory provisions forcing the company to liquidate tens of billions of dollars’ worth of Bitcoin every year; once Bitcoin enters a bull market, Strategy will most likely switch back to being a net buyer again.

It’s just that in the next cycle, Strategy’s influence on Bitcoin price action will be far less than in the previous cycle.

Who will take over Strategy and become the largest incremental buyer of Bitcoin?

Institutional capital.

In Bitcoin’s history, the market’s main buyers have continued to iterate: cypherpunks, Asian investors, U.S. retail investors, GBTC Grayscale Trust, and MSTR have taken over the lead one after another. For the next cycle, I believe the key incremental driver will be various types of institutional capital—global banks, asset managers, pension funds, endowment funds, sovereign wealth funds, and independent wealth management advisors—which control the largest pools of funds worldwide.

Many signals have already confirmed this trend. Morgan Stanley recently launched its own Bitcoin ETF; Wells Fargo will include Bitcoin in its standard asset allocation model; last year, Texas became the first U.S. state to establish a strategic Bitcoin reserve; and multiple sovereign wealth funds and national banks have allocated to Bitcoin or launched related research projects. In 2026, Bitcoin ETF flows saw outflows, but since the products launched in 2024, cumulative net inflows have exceeded $50 billion, and mainstream wealth-management platforms have already rolled out related products.

Does Strategy face a risk of liquidation and blow-up?

Based on the current data, there is no sign of it at all, and the various narratives about liquidation cascades do not fit financial logic. As mentioned earlier, the company’s total liquid assets are $52 billion, and its total debt is only $7 billion. Only if Bitcoin crashes by more than 70% and remains at low levels for an extended period would the company fall into an existential crisis.

Critics argue that the redemption pressure from more than $15 billion in preferred stock is a long-term negative, but in extreme cases the company can choose to pause preferred dividend payments, keeping the risk controllable.

What does this reflect about the current phase of the market?

STRC’s extreme volatility combined with MSTR’s share price pullback is a typical characteristic of the late stage of a cycle. The logic behind bull and bear cycles is highly consistent across all financial markets, including the crypto market: first, a bull market plays out; then investors get greedy and add leverage, and a large number of financial derivatives emerge; when a risk explosion point appears, the market reverses; after the market clears and all excess leverage is squeezed out, the bottom can truly form.

STRC is a typical product of the financial leverage in this cycle: capital chasing stable high yields flowed into STRC, and the company then used that money to buy Bitcoin. In simple terms, a group of funds seeking low-volatility stable returns ultimately flowed into Bitcoin assets with extreme volatility.

This kind of capital is inherently mismatched with Bitcoin’s asset attributes. It has to exit and be cleared for the market to find the bottom—and that process is currently underway.

The crypto market has seen almost exactly the same storyline before. During the 2019–2021 bull market, GBTC trusts traded at a persistent, large premium over the net value of the underlying Bitcoin. 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, allowing a massive amount of capital to flow into Bitcoin and spawning various complex financial instruments. Starting in 2021, the trust premium quickly disappeared, various leveraged instruments retreated in concentration, and the market bottomed out accordingly.

This cycle will most likely replicate the same path.

When will the market bottom arrive?

I can’t provide an exact timeline. No one can accurately predict a bottom; only after-the-fact review can clearly confirm it.

But you can focus on tracking a few high-confidence signals before the bottom forms: First, if MSTR’s share price trades at a discount to net asset value (NAV), it means market sentiment has completely shifted from greed to extreme panic, which is a clear sign that the bottom is close; second, if the Crypto Fear & Greed Index falls to historical extremes and enters an extreme fear range, it indicates value for positioning; third, if Bitcoin contract funding rates remain negative for a sustained period and retail traders are far more willing to short than to go long, market sentiment is thoroughly pessimistic.

In short: when the market reaches extreme pessimism, the opportunity for a reversal will appear.

The market is currently in the process of clearing out. The chain reaction 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 clear and adjust, I firmly believe the bottom is right around the corner. A new bull market will begin this autumn.