Key facts
- Strategy's perpetual preferred stock offering, STRC, fell significantly below its $100 par value.
- Bitcoin reached a 21-month low of $58,190 following the STRC incident.
- Bitwise CIO Matt Hougan believes Strategy's role as a dominant Bitcoin buyer is likely ending.
- Hougan anticipates investment banks, asset managers, pensions, endowments, and sovereign wealth funds will replace Strategy as Bitcoin's main demand driver.
- Strategy has $52 billion in liquid assets against $7 billion in debt, according to Hougan.
Strategy's position as a major Bitcoin buyer is being questioned following turmoil in its STRC offering, which saw the stock price drop significantly below its par value. This incident coincided with Bitcoin's fall to a 21-month low of $58,190.
Bitwise Chief Investment Officer Matt Hougan stated that Strategy's era as the dominant Bitcoin buyer is likely over. He anticipates that institutional investors, including investment banks, asset managers, pensions, endowments, and sovereign wealth funds, will become the primary drivers of Bitcoin demand in the future.
Strategy responded to the STRC concerns by committing to sell Bitcoin if necessary to cover dividends and by increasing its US dollar reserve to $2.55 billion. Hougan noted that Strategy has substantial liquid assets ($52 billion) against its debt ($7 billion), and Bitcoin would need to drop another 70% for the company to face significant risk. He also suggested that Strategy could cover dividends for the next 28 years if it began selling its Bitcoin holdings.
Hougan characterized the STRC incident as a classic example of "financial engineering" gone wrong, where money seeking high yields and low volatility was directed towards Bitcoin, an asset that offers neither. He believes this capital needs to be cleared out for the market to find a bottom.
However, Strive CEO Matt Cole offered a different perspective, suggesting that the media attention on Strategy's STRC issue has been excessive and has unduly impacted Bitcoin's price. Cole pointed out that Strategy's 847,363 Bitcoin holdings represent only 4% of the total supply, which he argued is not considered a material stake by SEC standards.