Strategy’s Bitcoin buying machine may be losing power as STRC stress turns the company into a more flexible capital manager, Bitwise says.
Strategy may no longer be Bitcoin‘s automatic buyer of last resort, according to Bitwise chief investment officer Matt Hougan, who says the stress around STRC, Strategy’s high-yield preferred stock, shows Michael Saylor’s company is entering a different phase of the cycle.
Hougan said in a July 1 note that the recent drama around STRC’s volatility is a “natural and important part of the crypto cycle,” since it reflects the same leverage unwind that often happens near the end of market downturns.
STRC was built to trade near $100 while paying a high dividend. It launched with a 9% yield, but as Bitcoin and MSTR stock fell, investors started questioning whether Strategy would keep paying the dividend. STRC then dropped as low as $75.
Hougan said the fear was understandable, noting though that he doesn’t see Strategy facing near-term liquidation risk:
“Big picture, Strategy looks good for the money. The firm has $49.6 billion in bitcoin and $2.6 billion in cash, against $6.8 billion in debt and $15.5 billion in preferred equity. If it sold its bitcoin today, it could pay all the dividends it owes for 28 years.”
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Strategy Role Changes
Hougan argued that Strategy’s role in the market has changed, saying the company was once the “most dominant bitcoin buyer in the world and a one-way source of bitcoin demand,” but adding that “those days are likely over.”
That change came after Strategy announced a new framework allowing it to sell Bitcoin to fund dividend obligations, while also raising STRC’s official rate to 12% and allowing open-market STRC purchases.
The Bitwise CIO said he doesn’t expect Strategy to become a large seller, though he now expects it to be less important to Bitcoin’s next cycle than it was in the last one, saying institutions, including banks and pensions, may replace Strategy as the next major Bitcoin buyer.
