Bitwise Chief Investment Officer Matt Hougan said Bitcoin may be approaching a market bottom as turmoil surrounding Strategy’s STRC preferred stock forces excess leverage out of the crypto market.
In his latest weekly memo, Hougan described the recent volatility in STRC and the decline in Strategy shares as classic end of cycle dynamics. He said the correction reflects the unwinding of financial engineering that brought yield seeking capital into Bitcoin during the bull market.
“The volatility in STRC is a natural and important part of the crypto cycle,” Hougan wrote. “I think we’re nearing the bottom.”
STRC is a perpetual preferred stock launched by Strategy to provide investors with a high yield while targeting a trading price near its $100 par value. Strategy used proceeds from the instrument to finance additional Bitcoin purchases.
Demand initially remained strong as Strategy gradually increased STRC’s dividend rate to 11.5%. The company raised about $10.5 billion through the product, according to Hougan.
