Author: Matt Hougan, Chief Investment Officer, Bitwise
Compiled by: Chopper, Foresight News
Last week, the price of Bitcoin fell below $60,000, hitting a new low for 2024. While there are multiple reasons for this decline, the core trigger was the perpetual preferred stock STRC issued by MicroStrategy.
I have received many questions from clients regarding STRC and MSTR. Given that they reflect the phase of the cycle we are currently in, I would like to address them here.
What is STRC?
STRC is a preferred stock product launched by MicroStrategy last year, designed to provide investors with high yield while maintaining a stable price at or near its $100 par value.
At issuance, STRC offered an annualized dividend yield of 9%. To maintain the $100 target price, the company stated that if the market price fell below $100, it would increase the dividend by 0.25%–0.5%. The higher yield would attract buyers, pushing the price back to the $100 par value.
This mechanism initially worked. MicroStrategy gradually raised the dividend to 11.5%, and STRC's price hovered around $100 for a long time. This high-yield, seemingly zero-risk product was widely sought after, with investors pouring a total of $10.5 billion into STRC. The company used all the raised funds to accumulate Bitcoin.
Over the past few weeks, as Bitcoin and MSTR's stock price weakened simultaneously, the market began to worry about MicroStrategy's ability and willingness to pay STRC dividends. Consequently, STRC's price plummeted, hitting a low of $75.
Is Investor Panic Justified?
Yes, and no.
Looking at the overall balance sheet, the company's fundamentals are very solid: it holds $49.6 billion worth of Bitcoin, $2.6 billion in cash, with total liabilities of $6.8 billion and preferred stock totaling $15.5 billion. If all Bitcoin were sold now, the proceeds would be enough to cover all dividend payments for the next 28 years.
However, the core disagreement lies in whether the company would choose to suspend dividends. MicroStrategy has the right to autonomously suspend STRC dividend payments; dividends are only accrued and there is no mandatory obligation to pay them immediately. With Bitcoin's continuous decline, the market fears that the company's cash flow is under pressure and it might halt dividends at any time, fueling this panic.
Did the Company Ultimately Suspend Dividends?
It did not.
This Monday, MicroStrategy announced a new operational framework: the company will opportunistically sell some Bitcoin specifically to fund dividend payments. Simultaneously, the company will no longer maintain the $100 par value by raising dividends, allowing STRC to float freely; furthermore, the company may repurchase STRC in the secondary market.
Following this announcement, both MSTR and STRC stock prices rebounded sharply.
Why Didn't MicroStrategy Simply Raise Dividends to Support the Price?
The required dividend increase to pull the price back to the $100 par value would have been unaffordably high.
The company's initial plan was to make small interest rate adjustments to stabilize the stock price. However, when STRC fell to $75, the market's effective yield had already reached 15.4%. To restore it to par value through interest rate hikes, the nominal dividend rate would need to increase by nearly 4 percentage points from 11.5% to 15.4%.
Even with a rate hike, the effect might not be ideal. A substantial increase in dividends could exacerbate market doubts: how can the company sustainably pay such high dividends? This could potentially trigger a new round of selling.
The gap between $75 and the $100 par value is too large to be bridged in the short term by raising dividends.
Under the New Framework, Can STRC Return to $100?
Not necessarily. The company is no longer relying on mechanized means to anchor the stock price at $100; although the official dividend has been raised to 12%, STRC is likely to return to $100 only if Bitcoin's price sees a significant increase.
What Do These Changes Signify?
Market opinions are highly divided, but in my view, MicroStrategy's role in the Bitcoin market has fundamentally changed.
For many years, it was the world's largest buyer of Bitcoin, consistently providing one-way buying pressure to the market. This phase is likely over. Going forward, the company will dynamically buy and sell Bitcoin based on market conditions, no longer being a net buyer only.
It's important to note: I do not believe MicroStrategy will engage in large-scale selling. There is no mandatory clause forcing the company to liquidate tens of billions of dollars in Bitcoin annually; once Bitcoin enters a bull market, MicroStrategy will likely become a net buyer again.
However, in the next cycle, MicroStrategy's influence on Bitcoin's price action will be far less than in the previous one.
Who Will Replace MicroStrategy as the Largest Incremental Buyer of Bitcoin?
Institutional capital.
Throughout Bitcoin's development, the dominant buyer demographic has continuously evolved: cypherpunks, Asian retail investors, US retail investors, the GBTC Grayscale Trust, and MSTR have successively taken the lead. I judge that the core incremental force for the next market upswing will be various institutional funds — global banks, asset managers, pension funds, endowment funds, sovereign wealth funds, and independent financial advisors — which control the world's largest pools of capital.
Several signals already confirm this trend. Morgan Stanley recently launched its own Bitcoin ETF; Wells Fargo has included Bitcoin in its standard asset allocation model; last year, Texas became the first U.S. state to establish a strategic Bitcoin reserve; several sovereign funds and national-level banks have already allocated to Bitcoin or initiated related research projects. Although Bitcoin ETFs experienced outflows in 2026, they have seen cumulative net inflows exceeding $50 billion since their launch in 2024, and mainstream wealth management platforms have already listed related products.
Is There a Liquidation Risk for MicroStrategy?
Based on available data, it's completely non-existent. All talk of liquidation and collapse does not align with financial logic. As mentioned earlier, the company's total liquid assets amount to $52 billion, with total debt being only $7 billion. Bitcoin would need to crash by over 70% and stay low for an extended period to push the company into a survival crisis.
Skeptics argue that the long-term pressure from the $15+ billion in preferred stock dividends is a downside risk, but in extreme situations, the company could choose to suspend preferred stock dividends, making the risk manageable.
What Stage of the Market Cycle Does This Reflect?
The severe volatility in STRC coupled with the correction in MSTR's stock price is a classic feature of the late cycle. All financial markets, including crypto, follow a highly unified bull-bear cycle logic: a bull market emerges first; subsequently, investor greed leads to increased leverage, giving rise to numerous financial derivative instruments; a risk event triggers a market reversal; the market clears, squeezing out all excess leverage before a true bottom is found.
STRC is a typical product of financial leverage in this cycle: funds seeking stable, high returns poured into STRC, and the company then used that money to buy Bitcoin. Simply put, a batch of capital seeking low-volatility, stable returns ultimately flowed into the highly volatile Bitcoin asset.
This type of capital is inherently mismatched with Bitcoin's asset characteristics and must exit and clear the market for a bottom to be established. We are currently experiencing this process.
History has repeated this exact playbook in the crypto market. During the 2019–2021 bull market, the GBTC Trust traded at a significant premium to its underlying Bitcoin Net Asset Value (NAV) for an extended period. Institutions could subscribe to GBTC at NAV, lock it up for six months, and then sell it on the secondary market at a 20%–50% premium, flooding massive capital into Bitcoin and spawning various complex financial instruments. Starting in 2021, the GBTC premium rapidly disappeared, leverage tools exited en masse, and the market subsequently bottomed.
This cycle is highly likely to follow a similar path.
When Will the Market Bottom Arrive?
I cannot give an exact timing; no one can accurately predict the bottom. Only in hindsight can it be clearly identified.
However, several precursor signals for a bottom can be closely monitored: First, when MSTR's stock price falls below its Net Asset Value (NAV) and trades at a discount, it signals that market sentiment has completely shifted from greed to extreme panic, a clear sign of nearing a bottom. Second, when the Crypto Fear & Greed Index drops to historical extremes, entering the extreme fear zone, it presents value for positioning. Third, when Bitcoin futures funding rates remain persistently negative, indicating retail shorting sentiment far exceeding longing sentiment, reflecting complete market pessimism.
Simply put: the reversal opportunity emerges only when the market falls to a point of extreme pessimism.
The market is currently in the process of clearing, and the chain reaction triggered by STRC is a necessary stage of the cycle. Every crypto cycle goes through this painful but essential deleveraging phase.
As the market continues to adjust and clear, I firmly believe the bottom is near, and a new bull market will begin this autumn.
