While improving macroeconomic conditions have supported a modest rebound, Bitwise Chief Investment Officer Matt Hougan believes the recent turmoil surrounding Strategy’s STRC preferred equity product reflects a broader market reset rather than a structural failure of the cryptocurrency itself.
In a detailed market memo, Hougan argued that the unwinding of leverage tied to Strategy's financing model represents a typical late-cycle event that often precedes a new phase of market recovery. He also suggested that Strategy's influence over Bitcoin demand is likely to diminish in the as institutional investors assume a larger role.
STRC Turmoil Reflects Classic End-of-Cycle Deleveraging
According to Hougan, the sharp decline in Strategy's perpetual preferred stock, STRC, was one of the main catalysts behind Bitcoin's recent sell-off below the $60,000 level.
Introduced as a high-yield preferred equity instrument, STRC was designed to trade close to its $100 par value while generating attractive returns for investors. Strategy used billions of dollars raised through the product to expand its Bitcoin holdings.
Bitwise CIO Matt Hougan said recent MSTR and STRC volatility reflects a natural end-of-cycle deleveraging process that is removing excess leverage from the crypto market. Source: @crypto_banter via X
However, confidence weakened after STRC fell from around $100 to nearly $75, raising concerns over Strategy's ability to maintain dividend payments if Bitcoin prices remained under pressure.
Despite those fears, Hougan argued that the company's balance sheet remains considerably stronger than market sentiment initially suggested.
"The volatility in STRC is a natural and important part of the crypto cycle. I think we're nearing the bottom," Hougan wrote.
He noted that Strategy holds approximately $49.6 billion in Bitcoin alongside $2.6 billion in cash, compared with roughly $6.8 billion in debt and $15.5 billion in preferred equity obligations. While Strategy retains the option to suspend dividend payments on preferred shares during periods of stress, Hougan said there is no immediate evidence suggesting liquidation risk.
To address investor concerns, Strategy recently introduced a revised capital management framework allowing the company to periodically sell Bitcoin to fund dividend obligations. It also abandoned its previous practice of automatically increasing STRC's yield to defend the $100 share price and indicated it may repurchase STRC shares in the open market.
The announcement helped stabilize both STRC and MSTR shares after the sell-off.
Bitwise CIO Says Strategy's Bitcoin Role Is Changing
While Hougan remains constructive on Strategy's long-term financial position, he believes its influence within the Bitcoin ecosystem is evolving.
"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.
Instead of acting solely as an aggressive accumulator, Strategy may increasingly alternate between buying and selling Bitcoin depending on market conditions and capital requirements.
Hougan added:
"I just expect it to be a less important figure in Bitcoin in the next cycle than it was in the last."
Rather than viewing this transition negatively, Hougan sees it as a sign that Bitcoin ownership is becoming more diversified.
He expects future demand to come increasingly from traditional financial institutions, including global banks, pension funds, asset managers, financial advisers, sovereign wealth funds, and endowments. He pointed to continued institutional adoption through Bitcoin ETF platforms, strategic reserve initiatives, and broader integration into investment portfolios as evidence that this transition is already underway.
Bitcoin Price Recovers as Macro Conditions Improve
Bitcoin also received support from broader macroeconomic developments. The latest U.S. labor market report showed the economy added 57,000 nonfarm jobs in June, significantly below the revised 129,000 recorded in May. Payroll figures for April and May were also revised lower by a combined 74,000 jobs, indicating hiring has cooled more than previously estimated.
Bitcoin (BTC) price chart. Source: via Brave New Coin
Following the report, U.S. Treasury yields declined while the U.S. Dollar Index weakened as traders increased expectations that the Federal Reserve could begin cutting interest rates later this year if inflation continues to moderate.
Historically, lower interest rates and improving liquidity conditions have supported higher-risk assets such as cryptocurrencies.
The softer employment data helped Bitcoin rebound alongside other digital assets, as investors interpreted the report as increasing the likelihood of monetary easing in the months ahead.
Bitcoin Technical Analysis Shows Stabilization Despite Bearish Trend
From a technical perspective, Bitcoin is showing early signs of stabilization, although the broader trend remains mixed.
Trading near $61,700, BTC has recovered modestly from its recent lows and remains above several short-term moving averages, providing near-term support around the $60,000-$61,000 region.
Bitcoin is building pressure below the $62,500 resistance while holding a key ascending trendline, increasing the potential for a breakout. Source: on TradingView
Momentum indicators, including the MACD and Momentum oscillator, have begun flashing tentative bullish signals, while the Relative Strength Index (RSI) remains in neutral territory, suggesting neither overbought nor oversold conditions.
However, the longer-term remains more cautious. Bitcoin continues to trade below most medium- and long-term moving averages, including the 20-day, 50-day, 100-day, and 200-day averages. Technical resistance is clustered between $62,000 and $63,500, while stronger resistance emerges closer to the $66,000 area.
Unless BTC can reclaim those levels, the broader trend continues to favor consolidation with downside risks still present.
Market Bottom May Require Further Sentiment Reset
Although Hougan believes the worst of the leverage unwind may be nearing completion, he emphasized that identifying an exact market bottom remains impossible in real time.
Instead, he is monitoring several sentiment indicators, including whether Strategy's stock eventually trades below its net asset value, whether the Crypto Fear and Greed Index reaches extreme fear levels, and whether leverage funding rates turn decisively negative.
According to Hougan, these conditions would suggest that excessive optimism has largely been removed from the market—a process he considers necessary before a sustainable Bitcoin recovery can begin.
While uncertainty remains, he views the ongoing deleveraging tied to STRC as a healthy cleansing phase rather than a long-term threat to Bitcoin's fundamentals, arguing that the market may be laying the foundation for its next growth cycle.