Bitcoin trades near $61,800 on July 3, recovering from a 21-month low of $58,190 hit on June 25. The drop followed turmoil around Strategy's preferred stock STRC, which broke from its $100 par value and fell below $75 late last month. Bitwise chief investment officer Matt Hougan says the episode changes how the market should think about Strategy's role going forward.

What Happened With STRC

Strategy, formerly MicroStrategy, built its reputation as Bitcoin's most consistent corporate buyer through years of debt and equity raises. One of its funding tools, Stretch (STRC), is a perpetual preferred stock designed to trade near $100 while paying investors a high yield. Money raised through STRC and similar products helped fund Strategy's Bitcoin purchases.

Late last month, STRC broke from its intended price and dropped toward $75. That raised doubts about whether Strategy could keep funding dividend payments if Bitcoin stayed under pressure. The stock's decline coincided with Bitcoin's slide below $60,000, and analysts pointed to STRC as one driver of that sell-off.

Strategy responded with a new capital framework. The company said it would sell Bitcoin when needed to cover dividends, authorized share buybacks for STRC, and dropped its earlier practice of raising the yield automatically to defend the $100 price. It also raised its dollar reserve to $2.55 billion, enough to cover about 17 months of preferred dividend and interest obligations.

Why Hougan Calls This a Turning Point

Hougan told Cointelegraph on July 3 that Strategy had been the world's most dominant Bitcoin buyer for years, acting as a one-way source of demand. He said that period is likely over. His view is that Strategy will still buy Bitcoin, but it will now shift between buying and selling depending on market conditions rather than accumulating without pause.

He compared the STRC episode to the collapse of Grayscale's GBTC premium in 2021, another case where a financial product built around Bitcoin ran into trouble. His explanation is that capital chasing high yield and low volatility got funneled into Bitcoin purchases, even though Bitcoin offers neither trait reliably. That mismatch, he said, needs to clear out before the market can find a lasting bottom.

Hougan expects other buyers to take over the role Strategy has played. He named investment banks, asset managers, pension funds, endowments, and sovereign wealth funds as the likely source of demand in the next cycle. He pointed to signs this shift is already happening, including Morgan Stanley launching Bitcoin ETFs, Wells Fargo adding BTC exposure to model portfolios, and Texas becoming the first US state to fund a Bitcoin reserve.

The Balance Sheet Case

Hougan pushed back against the idea that Strategy faces a solvency risk. He said the company holds roughly $52 billion in liquid assets against about $7 billion of debt, a cushion that would require Bitcoin to drop another 70%, to around $18,500, before Strategy would be at real risk.

He also said that if Strategy started selling Bitcoin today, its holdings could cover dividend payments on STRC and its other preferred products for 28 years. Hougan still expects the company to be a net buyer once the next bull market takes hold, even with its reduced dominance.

Pushback From Strive

Not everyone agrees the STRC episode deserves this much weight. Strive CEO Matt Cole argued the story received more media attention than it warranted and pushed Bitcoin's price down more than the facts justified. Speaking with NovaDius Wealth Management president Nate Geraci, Cole pointed out that Strategy's 847,363 Bitcoin holdings represent about 4% of total supply.

Cole framed that stake using SEC disclosure standards, where a position becomes material only at 5% ownership. His point is that a 4% holder selling gradually should not be treated as a threat to the entire market.

Other voices in the market took a harder line. JPMorgan said Strategy's new policy of selling Bitcoin to fund dividends creates avoidable two-way risk, adding uncertainty that was not present when the company only bought. That view sits between Hougan's "healthy deleveraging" framing and Cole's "overblown" framing, treating the policy shift itself as a new source of volatility rather than a fix.

What This Means for Bitcoin

The debate over Strategy's future importance connects to a broader question about where Bitcoin demand comes from next. For years, a single company with a public buying program set a floor under expectations. If that buyer becomes a swing participant instead of a constant one, the market has to rely more on the institutions Hougan named, and their buying patterns are less predictable and less publicly tracked.

Bitcoin's mid-week rebound above $61,000 came after Federal Reserve Chair Kevin Warsh signaled easing inflation concerns, not from any Strategy-related news. That timing supports the idea that macro conditions, not one company's balance sheet, are driving the recovery. Whether Strategy's reduced role becomes a lasting feature of the market or a temporary reaction to one bad month for STRC will depend on how the next few quarters unfold.