Strategy concerns exaggerated?…Bitwise "Bitcoin bottom is near"

▲ Strategy (MSTR), Bitcoin (BTC) / AI Generated Image ©

While the increasing volatility of Strategy's preferred stock STRC is spreading market anxiety, an analysis suggests it could actually be a signal marking the final adjustment phase of the Bitcoin (BTC) cycle. Bitwise stated that there are no major issues with Strategy's financial health and predicted that a Bitcoin bull run would resume this autumn once the current correction concludes.

According to investment media FXStreet on July 2 (local time), Matt Hougan, CIO of Bitwise, evaluated the recent sharp declines in STRC and Strategy's stock price not as a systemic risk to the overall Bitcoin market, but as "a typical deleveraging process in the late stages of a cycle." He diagnosed, "STRC volatility is a natural and important part of the crypto cycle, and the market is nearing a bottom."

STRC is a perpetual preferred stock designed to offer high dividend yields while maintaining its stock price at par value of $100. Strategy has been acquiring additional Bitcoin with funds raised based on investor demand. However, recent weakness in Bitcoin and MSTR stock prices has raised concerns about dividend sustainability, causing STRC's price to drop to $75. In response, the company announced new operational plans, including selling Bitcoin if necessary to secure dividend funds and buying back STRC in the open market.

Matt Hougan assessed these measures as an inevitable choice but drew a clear line, stating that 'forced liquidation rumors' circulating in some parts of the market are far from the truth. He explained that Strategy currently holds approximately $49.6 billion worth of Bitcoin and $2.6 billion in cash, while its debt is only around $6.8 billion. He also analyzed that preferred stock dividends could be suspended if necessary, providing sufficient financial flexibility, and that the company would only face substantial risk if Bitcoin were to plummet by over 70% and remain at that level for several years.

Hougan also predicted a shift in the central axis of Bitcoin demand. He stated that Strategy would gradually hand over its role as the largest corporate buyer to institutional investors, forecasting that large institutions such as banks, asset managers, pension funds, sovereign wealth funds, and financial advisors would drive future Bitcoin demand. He also explained that increasing institutional participation, such as Morgan Stanley offering Bitcoin spot ETFs and Wells Fargo including it in model portfolios, supports this trend.

Hougan evaluated the current correction phase as similar to a typical cycle where the market regains balance after excessive optimism and increased leverage. He stated that the market bottom is near and expressed expectations that a Bitcoin bull run would restart this autumn, driven by continuous institutional participation.

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