Bitwise Says Bitcoin Strategy Will Matter Less After STRC Incident

Strategy’s long streak as one of Bitcoin’s most consistent institutional buyers may be ending, according to Bitwise chief investment officer Matt Hougan. Speaking Thursday, Hougan suggested the company’s dominance as a “one-way” source of demand is likely to shrink in the next market cycle, after volatility around Strategy’s principal perpetual preferred stock product, Stretch (STRC).

The reassessment comes after STRC broke sharply from its $100 par value to below $75 late last month, a move that undermined investor confidence in the sustainability of Strategy’s dividend-style model. The timing also overlapped with broader market stress, when Bitcoin fell to a 21-month low of $58,190 on June 25.

Key takeaways

• Bitwise CIO Matt Hougan said Strategy’s era as Bitcoin’s dominant buyer may be over, with other institutional allocators expected to play a larger role next cycle.
• STRC’s move away from $100 par value below $75 fueled concerns about whether Strategy’s yield structure can hold up through “end-of-cycle” dynamics.
• Despite the STRC shock, Hougan argued Strategy is not facing near-term liquidity risk based on liquid asset coverage.
• Strive CEO Matt Cole pushed back, calling the STRC episode overblown and noting Strategy’s Bitcoin holdings are about 4% of total supply.

Strategy’s buyer dominance questioned after STRC turmoil

For years, Strategy has been widely viewed as a steady, high-conviction buyer of Bitcoin—helping provide consistent demand even when broader sentiment weakened. Hougan framed Thursday’s comments around a shift in what investors should expect from that demand profile.

“For years, Strategy has been the most dominant Bitcoin buyer in the world and a one-way source of Bitcoin demand. Those days are likely over,” Hougan said in a CIO memo, adding that he expects the company to be “less important” than it was in the previous cycle. In his view, banks, asset managers, pensions, endowments, and sovereign wealth funds may replace Strategy as Bitcoin’s primary demand engine as the next upcycle develops.

Hougan’s concern centers on how STRC behaved during a period when markets were already under pressure. The STRC incident raised fears that the structure underpinning dividend payments could be strained when conditions tighten—particularly in late-cycle environments where risk appetite falls and funding costs rise.

Why Hougan sees STRC as “end-of-cycle dynamics”

Hougan characterized the STRC drop as a pattern he associates with late-cycle stress. He compared the situation to a prior example in 2021: the collapse of Grayscale’s GBTC premium.

His argument is essentially about fit. According to Hougan, “money searching for high yields and low volatility was used to buy Bitcoin, which offers neither.” In that framing, the market eventually needs to “clear out” capital that was attracted by yield characteristics that Bitcoin itself does not reliably provide, before a more durable bottom can form.

This perspective matters for traders and longer-term investors because it reframes Strategy’s recent volatility away from a single-company solvency story and toward a broader liquidity-and-demand composition story—one where the source of marginal demand changes as the cycle matures.

Strategy responds: funding dividends and increasing reserves

In the aftermath of the STRC disruption, Strategy said it would sell Bitcoin when necessary to fund dividends, according to coverage earlier published by Cointelegraph. The company also expanded its US dollar reserve to $2.55 billion, easing some immediate concerns about operational coverage.

Even with those steps, Hougan said Strategy’s role as an aggressive buyer has weakened. The implication for market participants is that reserve moves and occasional Bitcoin sales can stabilize the dividend narrative in the short term, but may also reduce the consistency of net buying during turbulent periods.

Hougan nonetheless said he still expects Strategy to be a “net buyer” in the next bull run—suggesting the firm’s long-term posture may persist, even if its influence on price dynamics is likely to be less dominant than in the last cycle.

Debate over materiality and liquidity risk

While STRC became the focal point, Strategy leadership pushed back on how much attention the incident deserves. Strive CEO Matt Cole argued that the episode has been overemphasized by media and that Bitcoin’s selloff may have been driven more by the broader market than by any single factor.

Speaking with NovaDius Wealth Management president Nate Geraci, Cole noted that Strategy’s 847,363 Bitcoin represents about 4% of total supply. He also referenced US Securities and Exchange Commission standards for materiality, stating that a 4% stake would not be considered material under SEC thresholds, which he described as starting at 5%.

“If one person owned 4%, you don’t even have to report that publicly to the SEC because the SEC deems 4% to be immaterial. They start to view a position to be material at 5%.”

Hougan, meanwhile, addressed liquidity in a more quantitative way. He said Strategy has $52 billion worth of liquid assets marked against $7 billion of debt. In his assessment, Bitcoin would need to fall another 70%—to roughly $18,500—for Strategy to face risk. He also added that if the company began selling Bitcoin immediately, it could cover dividends from STRC and other perpetual preferred stock offerings for the next 28 years.

Taken together, the two positions highlight a tension that investors should watch: one view suggests the STRC mechanism is a late-cycle stress test that affects demand composition and price, while the other emphasizes reserve coverage and argues that the company’s balance sheet prevents an immediate liquidity threat.

For now, the key question is not whether Strategy can operate through the current strain, but whether the market’s next wave of Bitcoin buying will be driven by the same yield-seeking, vehicle-based demand—or by a broader set of long-term allocators that Hougan expects to take a bigger share.

As conditions evolve, investors should monitor whether STRC stabilizes relative to par and whether Strategy’s net buying pace remains consistent enough to reassert influence—while also tracking if incremental demand truly shifts from Strategy-style products to the wider institutional categories Hougan cited.