Bitwise Asset Management Chief Investment Officer Matt Hougan stated in a July 1, 2026, memo that the recent volatility in Strategy’s STRC preferred equity is a “natural and important” sign that Bitcoin is nearing its market bottom. Writing in response to client concerns, Hougan argued that the sharp STRC sell-off represents the kind of end-of-cycle deleveraging that typically precedes a recovery.
Bitcoin dipped below $60,000 in late June, hitting its lowest level since 2024. The asset briefly fell to $58,189 on June 25, 2026, amid turmoil surrounding the preferred stock Strategy uses to fund its aggressive acquisition strategy.
Bitcoin is nearing its market bottom according to Bitwise analysis
STRC launched last year with a $100 par value and an initial yield of 9%. Strategy gradually raised that rate to 11.5% to maintain its share price near par. Investors poured $10.5 billion into the instrument, which funded the firm’s acquisition of the digital asset.
But as Bitcoin and MSTR common stock began to slide, investors questioned the sustainability of these dividend payments. This skepticism drove STRC’s price to record lows, falling as much as 26% below par value to trade at $73.65 on June 25.
Hougan argues this flushing of capital chasing high yield and low volatility is essential. He compared it to the 2021 Grayscale Bitcoin Trust (GBTC) premium collapse. That event cleared out leveraged trades before the market could reset and move higher.
Strategy introduced a new framework for digital credit capital
Strategy introduced a new framework on Monday, June 30, 2026, to address mounting liquidity concerns. The firm will no longer automatically hike interest rates to defend the $100 price target for its preferred stock. This policy shift allows STRC to trade at a variable price determined by the market.
Strategy also confirmed it may periodically sell Bitcoin to fund dividend payments under the new framework. Between May 26 and 31, the company sold 32 Bitcoins worth approximately $2.5 million to meet obligations. This represented only 0.0038% of its total holdings at the time.
The firm also signaled it may purchase STRC on the open market. This move could help stabilize the instrument after its recent decline from par. Both MSTR and STRC rose sharply following the news of the structural pivot.
Assessing Strategy’s balance sheet and dividend coverage
Hougan dismissed liquidation concerns as “defying the math” behind the company’s financials. Strategy holds approximately $49.6 billion in Bitcoin and $2.6 billion in cash. Against these assets, the firm carries $6.8 billion in debt and $15.5 billion in preferred equity.
Hougan calculates that if the company sold its Bitcoin today, it could cover its dividend obligations for 28 years. However, annual dividend obligations recently quadrupled to roughly $1.2 billion by June 28, 2026. This caused cash reserve coverage to drop to approximately 14 months.
Despite these obligations, the firm continues to accumulate assets. Strategy has purchased more than 3,000 BTC worth about $200 million following its small sale in May. This suggests the firm’s role as a dominant buyer remains active, though potentially less concentrated than before.
Institutional demand and the October bottom thesis
Hougan believes that a new wave of institutional demand is ready to lead the next phase of growth. He pointed to over $50 billion in cumulative ETF inflows since early 2024 as evidence. Major financial institutions like Morgan Stanley and Wells Fargo are now integrating the asset into model portfolios.
Even the state of Texas has established a strategic Bitcoin reserve, further legitimizing the asset. A thorough Bitcoin price analysis shows that while retail traders are often driven by sentiment, institutions follow disciplined allocation models. This structural shift in ownership often precedes a cycle transition.
Bitwise European head of research Andre Dragosch expects a definitive bottom around October 2026. Dragosch is monitoring semiconductor stocks as a potential catalyst for a reversal. A sharp sector decline could prompt a dovish reaction from the Federal Reserve, easing broader macro outlook pressures.
Hougan is also watching for Bitcoin funding rates to turn negative. This would signal that retail bearishness has peaked, providing a contrarian indicator for a price bounce. While bottoms are only obvious after the fact, the Bitwise CIO expects a new bull market to take hold by fall.