Breaking! $BTC drops below 60K, STRC flash-crashes by $75. Chief strategist: This is the final squeeze before the bull market—bottoming out in autumn and taking off.

Last week, the price of $BTC broke through $60k, hitting its lowest point since 2024. On the surface, it was a combination of multiple negative factors, but the trigger was clear—the perpetual preferred stock STRC issued by Strategy company collapsed.

I have received a large number of inquiries from clients, with two core questions: What exactly is STRC? Will this company explode? To answer these, we must first understand the position of the current cycle.

STRC is a preferred stock product launched by Strategy last year. The original design was simple: provide investors with high returns while keeping the price stable around the $100 par value. At launch, the annualized dividend rate was 9%. The company promised: if the market price falls below $100, it would increase the dividend by 0.25% to 0.5%. Higher returns attract buyers, and the price naturally returns to par. This mechanism was effective early on—the dividend gradually increased to 11.5%, and STRC's stock price hovered around $100 for a long time. Under the guise of high yield and low risk, investors poured a total of $10.5 billion into it, and Strategy used all the money to increase its holdings of $BTC.

In the past few weeks, $BTC and MSTR stock prices have weakened together, and the market has begun to doubt whether Strategy has the ability and willingness to continue paying dividends. STRC plummeted accordingly, hitting a low of $75. Is the panic justified? Yes and no.

Looking at the balance sheet: the company holds $49.6 billion in $BTC and $2.6 billion in cash, total debt is only $6.8 billion, and preferred stock totals $15.5 billion. Even if it liquidates all $BTC now, the proceeds would be enough to pay all dividends for the next 28 years. But the core disagreement lies in the fact that the company has the right to suspend dividends. Strategy has the autonomous right to suspend STRC dividend distributions; dividends are merely accrued but not subject to mandatory redemption. As $BTC continues to decline, the market worries that the company's cash flow is under pressure and that it may stop dividends at any time—thus the panic fermented.

Did the company eventually stop dividends? No. This Monday, Strategy released a new framework: it will selectively sell some $BTC to specifically pay dividends; at the same time, it will no longer maintain the $100 par value by raising dividends, allowing STRC to float freely; additionally, it may repurchase preferred stock. As soon as the announcement was made, both MSTR and STRC rebounded sharply.

Why not raise the dividend to support the price? Because to pull the price back to the $100 par value, the required increase in dividends has become unbearably high. When STRC fell to $75, the market's actual yield had already reached 15.4%. To restore the par value by raising the dividend, the nominal dividend rate would need to be increased nearly 4 percentage points from 11.5% to 15.4%. Even with a dividend increase, the effect might not be good—a sharp increase in dividends would actually aggravate market doubts: how can the company sustain paying such high dividends? It could trigger a new round of selling. The gap between $75 and the $100 par value is too large; short-term dividend increases cannot reverse the situation.

Under the new framework, can STRC return to $100? Not necessarily. The company no longer uses mechanistic means to anchor the $100 stock price; although the official dividend has been raised to 12%, only if $BTC sees a significant rise will STRC be able to return to $100.

What does this series of changes mean? Market opinions are highly divided, but in my view, Strategy's role in the $BTC market has completely changed. For many years, it has been the world's largest buyer of $BTC, continuously providing one-way buying pressure to the market. This phase has most likely come to an end. Going forward, the company will dynamically buy and sell $BTC based on market conditions, no longer only buying and not selling.

It is important to note: I do not believe Strategy will engage in large-scale selling. There is no mandatory clause forcing the company to liquidate billions of dollars of $BTC each year; once $BTC enters a bull market, Strategy will most likely become a net buyer again. However, in the next cycle, Strategy's influence on the $BTC market will be far less than in the previous cycle.

Who will replace Strategy as the largest incremental buyer of $BTC? Institutional funds. In the development history of $BTC, the main buyers in the market have continuously iterated: cypherpunks, Asian investors, U.S. retail investors, GBTC Grayscale Trust, and MSTR have successively taken the lead. The core incremental driver of the next market cycle, in my judgment, will be various types of institutional funds—global banks, asset managers, pension funds, endowments, sovereign wealth funds, and independent financial advisors—which hold the largest pools of capital in the world.

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

Does Strategy face liquidation or margin call risks? Based on available data, absolutely not. Various liquidation collapse narratives do not align with financial logic. As mentioned earlier, the company's liquid assets total $52 billion, with total debt of only $7 billion. $BTC would need to plummet by over 70% and stay low for a long time to put the company in a survival crisis. Market skeptics believe that the redemption pressure of over $60k in preferred stock is a long-term negative, but in extreme scenarios, the company can choose to suspend preferred stock dividends, making the risk controllable.

What does this reflect about the current market phase? The violent fluctuations of STRC coupled with the pullback of MSTR's stock price are typical characteristics of the late cycle. All financial markets, including crypto markets, share a highly unified bull-bear cycle logic: first, a bull market emerges; then investors become greedy and add leverage, giving rise to a large number of financial derivatives; then a risk flashpoint appears, and the market reverses; only after the market clears and squeezes out all excess leverage does the true bottom emerge.

STRC is a typical product of financial leverage in this cycle: funds seeking stable high yields poured into STRC, and the company then used that money to buy $BTC. Simply put, a batch of capital seeking low-volatility stable returns ultimately flowed into the highly volatile $BTC asset. This type of capital inherently does not match the asset characteristics of $BTC, and it must be completely cleared out for the market to find the bottom—this process is currently underway.

The crypto market has seen an identical storyline in history. During the 2019–2021 bull market, the GBTC trust traded at a sustained large premium over the underlying $BTC net asset value. Institutions could subscribe to GBTC at par, lock up for six months, and then sell on the secondary market at a 20%–50% premium, allowing massive amounts of capital to flow into $BTC and spawning various complex financial instruments. Starting in 2021, the trust's premium quickly disappeared, all types of leveraged tools exited en masse, and the market subsequently bottomed. The current market cycle will most likely repeat the same path.

When will the market bottom arrive? I cannot give an exact time; no one can accurately predict the bottom—only after-the-fact review can clearly confirm it. However, we can focus on tracking several pre-bottom signals: First, when MSTR's stock price falls below net asset value (NAV) and trades at a discount, it indicates that market sentiment has completely shifted from greed to extreme fear, which is a clear sign that the bottom is near; Second, when the Crypto Fear & Greed Index drops to historical extremes and enters the extreme fear zone, it presents value for positioning; Third, when the $BTC perpetual contract funding rate remains consistently negative, retail traders' shorting willingness far exceeds longing, and market sentiment is thoroughly pessimistic.

In simple summary: only when the market falls to extreme pessimism will the opportunity for reversal emerge. The market is currently in the process of clearing, and the chain of fluctuations triggered by STRC is an inevitable 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 that the bottom is already close at hand, and a new bull market will begin this fall.

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