A sharp plunge in Strategy preferred stock STRC may be a signal that the bitcoin market is entering a bottoming phase, an outlook showed.

On July 3, CoinPost reported that Matt Hougan (맷 호건), chief investment officer at Bitwise, viewed the STRC slump as a typical late-cycle phenomenon and expected a new bull market could begin this fall.

Hougan said the structure behind STRC has become harder to sustain as bitcoin recently slid to below $60,000, its lowest level since 2024. STRC is a preferred stock Strategy issued last year, designed to offer a high dividend yield while aiming to trade near a $100 par value. The initial dividend yield was 9 percent, and if the price fell below par, the structure raised the yield by 0.25 to 0.50 percentage points to sustain demand.

While the structure held, STRC increased its yield step by step to 11.5 percent and drew $10.5 billion from investors seeking high yield and low volatility. Strategy has used the funds to buy bitcoin. But as bitcoin and Strategy shares fell together, investors began questioning the company's capacity to pay dividends. STRC slid from its $100 par value to as low as $75 at one point.

Hougan said the effective yield rose to 15.4 percent in that range, and that restoring par would have required raising the stated yield sharply from 11.5 percent to above 15 percent. "The increase would have been so large it created a risk of amplifying market anxiety," he said.

As those concerns grew, Strategy introduced a new framework on Monday this week that would allow it to sell bitcoin regularly to secure funding for dividends. It scrapped the automatic interest-rate step-up mechanism aimed at maintaining the $100 par value and changed its policy to trade STRC at a floating price. It also raised the stated dividend yield to 12 percent. Hougan said STRC would not be likely to return to par unless bitcoin prices rebound sharply.

Hougan interpreted the adjustment as a structural unwinding. Funds seeking high yield and low volatility flowed into bitcoin through Strategy, but bitcoin is not that type of asset in the first place, he said. He viewed the exit of capital that does not match the asset's characteristics as an unavoidable part of forming a bottom.

He did not see an imminent risk of forced liquidation for Strategy's finances. Hougan assessed Strategy as holding $49.6 billion of bitcoin and $2.6 billion in cash, against $6.8 billion in debt and about $15.5 billion in preferred stock.

Hougan also offered a diagnosis of changing market structure. He said Strategy's role as the largest bitcoin buyer that does not sell may change going forward. It could become both a buyer and a seller depending on market conditions, but it is not a structure that would trigger large-scale forced selling, and it may not be an actor that drives the market as much as in the previous cycle.

He pointed to institutional investors as the next source of demand. Morgan Stanley has launched its own spot bitcoin exchange-traded fund, and Wells Fargo has included bitcoin in its model portfolios, he said, citing continued moves by institutions. Texas created the first state government bitcoin reserve in the United States, and spot bitcoin ETFs have attracted more than $50 billion since their 2024 launch. Most major financial advisory platforms have also approved handling related products.

On the same day, JPMorgan also said Strategy's plan to sell bitcoin could increase two-way risks in the market. It also presented the view that expanding cash-like reserves and passing the U.S. Clarity bill would be needed for a second-half recovery. JPMorgan said cash reserves currently at about 17 months should be increased to 24 to 36 months.

Hougan suggested three indicators of a bottom. They are whether Strategy shares trade below net asset value, whether the crypto Fear & Greed Index enters an extreme fear zone, and whether perpetual futures funding rates turn negative. He said these indicators show the shift from greed to fear is nearing an end. "The bottom is closer than at any time so far," he said, again stressing the possibility of a fall bull market.

The adjustment showed Strategy's funding structure is directly linked to demand for bitcoin. It is also becoming a turning point for gauging whether buyers in the market shift from high-yield product-driven money to institutional investors.