Bitwise CIO Says STRC Flush, Not Systemic Risk, Nears Bottom

Bitcoin held above $60,000 this week as Bitwise Chief Investment Officer Matt Hougan argued the unwind of Strategy’s STRC preferred equity instrument is a late-cycle deleveraging, not a systemic failure. He sees a bottom forming before a fall rally.

STRC is a perpetual preferred equity note offering high yield while trading near a fixed value. Proceeds funded bitcoin exposure on Strategy’s (Nasdaq: MSTR) balance sheet. The structure worked when bitcoin rose but weakened as it fell. Capital flowing into STRC “never really fit bitcoin,” Hougan wrote in a July 1 analysis. The ongoing deleveraging is removing excess built during the rally, he said.

Hougan distinguished between price recovery and market structure. Short-term stabilization after a dip near $60,000 may reflect temporary relief, not a trend reversal. He said bull markets often drive increasingly complex leverage structures that later unwind under stress. STRC is one example within a broader deleveraging cycle.

He outlined two signals he’d watch for. One is MSTR trading at a discount to its net asset value, which would indicate greed turned to fear (see the MSTR stock page for current valuation). Another is the Crypto Fear and Greed Index hitting extreme fear. Leverage funding rates turning decidedly negative – more retail interest in shorting bitcoin than going long – would be a third sign. “You want it to be so bad it’s good,” he said.

Hougan concluded that STRC volatility fits a late-cycle deleveraging phase that may precede a new bitcoin uptrend. The crypto market analysis tracking this cycle shows similar patterns in prior episodes.

Bitcoin traded around $62,741 on Bitcoin.com Markets. Bitwise Europe’s sovereign default model values bitcoin roughly $150,000 above that price. The gap widened.