- Bitwise CIO Matt Hougan believes Bitcoin is approaching a market bottom as leverage tied to Strategy’s STRC preferred stock is being flushed out.
- Hougan says the recent volatility resembles previous crypto cycle bottoms, where excessive financial engineering was unwound before a recovery.
- He expects institutional investors to become Bitcoin’s primary source of demand during the next bull market.
Bitwise Chief Investment Officer Matt Hougan believes Bitcoin may be entering the final stages of its current correction, arguing that recent turmoil surrounding Strategy’s STRC preferred stock is helping remove excess leverage from the market.
In his latest weekly memo, Hougan described the recent volatility as a healthy reset rather than the beginning of a deeper collapse, suggesting Bitcoin could be much closer to establishing its next major bottom than many investors realize.
Strategy’s Financing Shift Signals a Turning Point
According to Hougan, much of the recent market weakness has been driven by the unwinding of financial structures that attracted yield-focused investors during Bitcoin’s bull market.
Strategy’s STRC preferred stock was originally designed to generate high yields while allowing the company to raise billions of dollars to purchase additional Bitcoin. Demand remained strong as the dividend climbed to 11.5%, helping Strategy raise approximately $10.5 billion.
However, declining Bitcoin prices and weakness in Strategy’s stock caused investors to question the long-term sustainability of the preferred dividend, sending STRC sharply lower.
Hougan believes this type of deleveraging is common near the end of crypto market cycles.
Strategy Is No Longer a One-Way Bitcoin Buyer
This week, Strategy introduced a new capital management framework that gives the company greater financial flexibility.
The updated plan allows Strategy to sell portions of its Bitcoin holdings to strengthen its cash reserves, support preferred dividend payments, manage debt obligations, and fund share buybacks when necessary.
While the move represents a major shift from Strategy’s long-standing buy-and-hold approach, Hougan does not believe it signals aggressive Bitcoin selling.
Instead, he argues the company is evolving into a more flexible capital allocator that may buy or sell Bitcoin depending on market conditions.
Institutional Demand Could Drive the Next Rally
Looking beyond Strategy, Hougan believes the next Bitcoin bull market will be driven by a much broader group of institutional investors.
He expects banks, pension funds, asset managers, financial advisers, endowments, and sovereign wealth funds to become the dominant source of new demand as Bitcoin adoption continues expanding.
According to Hougan, that transition would make Bitcoin less dependent on a single corporate buyer and create a healthier long-term market structure.
Why Hougan Thinks the Bottom Is Near
Hougan compared today’s environment to previous crypto market bottoms, including the unwinding of the Grayscale Bitcoin Trust premium after the 2019-2021 bull market.
In both cases, he argues, excessive leverage and financial engineering had to be removed before the market could establish a durable recovery.
He also highlighted several indicators investors should monitor, including Strategy’s valuation relative to its Bitcoin holdings, persistently negative funding rates, and extreme readings in the Crypto Fear & Greed Index.
While he acknowledges that identifying an exact market bottom is impossible in real time, Hougan believes current conditions suggest Bitcoin is moving through the final phase of its correction.
He added that, if history repeats, the next Bitcoin bull market could begin later this fall.
