SKN | Bitwise Says Strategy May Lose Its Dominant Role in Bitcoin’s Next Growth Cycle

• Bitwise CIO Matt Hougan believes Strategy will play a smaller role in driving Bitcoin demand following the recent STRC market disruption.

• Hougan expects investment banks, pension funds, asset managers and sovereign wealth funds to become larger sources of institutional Bitcoin demand.

• Strategy’s STRC preferred stock fell well below its $100 par value, raising concerns about the sustainability of its financing model.

• Despite recent volatility, analysts say Strategy remains financially stable and is expected to continue accumulating Bitcoin over the long term.

Strategy’s Influence on Bitcoin May Be Changing

Bitwise Chief Investment Officer Matt Hougan believes Strategy’s position as the cryptocurrency market’s most influential corporate Bitcoin buyer is likely to diminish after the company’s recent preferred stock volatility exposed weaknesses in its financing model.

Speaking on Thursday, Hougan said Strategy has spent years acting as one of Bitcoin’s largest and most consistent sources of demand. However, he expects that role to become less significant during the next market cycle as institutional participation broadens.

Rather than relying on a single corporate buyer, Hougan believes future Bitcoin demand will increasingly come from investment banks, asset managers, pension funds, endowments and sovereign wealth funds expanding their exposure to digital assets.

STRC Volatility Raises Questions

Investor confidence weakened after Strategy’s flagship perpetual preferred stock, STRC, declined sharply from its $100 reference price to below $75 late last month.

The selloff fueled concerns that the company’s dividend structure and financing strategy could become more difficult to sustain during periods of market weakness.

The uncertainty coincided with Bitcoin falling to a 21-month low of approximately $58,190 on June 25, adding further pressure across cryptocurrency markets.

In response, Strategy announced plans to strengthen its financial position by increasing its U.S. dollar reserves to approximately $2.55 billion while indicating it could sell Bitcoin if necessary to meet dividend obligations.

According to Hougan, these defensive measures reduce immediate financial risks but also make Strategy less likely to remain the aggressive Bitcoin accumulator it has been in previous years.

Financial Engineering Under Scrutiny

Hougan described the STRC episode as an example of financial engineering reaching its limits during the later stages of a market cycle.

He compared the situation to the collapse of Grayscale’s GBTC premium during the 2021 bull market, arguing that investors seeking stable income and low volatility were effectively financing purchases of an inherently volatile asset.

According to Hougan, the mismatch between investor expectations and Bitcoin’s risk profile created conditions that ultimately required market correction before establishing a healthier foundation for future growth.

Some Analysts See the Concerns as Overstated

Not all market participants share Hougan’s concerns.

Strive CEO Matt Cole argued that the market reaction surrounding STRC has been exaggerated and has contributed to unnecessary downward pressure on Bitcoin prices.

Cole noted that Strategy currently owns approximately 847,363 Bitcoin, representing roughly 4% of the cryptocurrency’s circulating supply.

He pointed out that, under U.S. Securities and Exchange Commission standards, a 4% ownership stake would generally not be considered materially controlling, suggesting the company’s influence over Bitcoin markets may be smaller than many investors assume.

Strategy Remains Financially Strong

Despite concerns surrounding STRC, Hougan emphasized that Strategy continues to maintain a strong balance sheet.

According to his assessment, the company holds approximately $52 billion in liquid assets against roughly $7 billion in debt, leaving a substantial financial cushion.

He estimated that Bitcoin would need to decline by an additional 70%, to roughly $18,500, before Strategy’s financial position would face meaningful stress.

Hougan also noted that, based on current resources, the company could continue funding dividend obligations on STRC and its other preferred securities for approximately 28 years, even if it began selling Bitcoin today.

Outlook

While Strategy is expected to remain a significant institutional Bitcoin holder, market observers increasingly believe the cryptocurrency’s next phase of adoption will be driven by a broader range of institutional investors rather than a single corporate buyer. As traditional financial institutions continue expanding their digital asset exposure, Bitcoin demand may become more diversified, potentially reducing reliance on Strategy as the market’s dominant accumulation vehicle.