Bitwise Says Strategy’s Era of Dominating Bitcoin Purchases Is Effectively Over

Bitwise Asset Management said Strategy’s dominance as the leading buyer of Bitcoin has effectively come to an end.

Matt Hougan, Bitwise’s chief investment officer, told Cointelegraph on July 3 that Strategy had been the world’s most dominant buyer of Bitcoin for years and a one-sided source of demand, but that period has likely ended.

In the next cycle, Strategy will matter less to the Bitcoin market than it did in the last one, Hougan said. He added that investment banks, asset managers, pension funds, university endowments and sovereign wealth funds will replace Strategy as the main sources of Bitcoin demand.

The assessment follows turmoil late last month involving Strategy’s perpetual preferred stock product, STRC. The security fell from its $100 par value to below $75, fueling doubts about the sustainability of its dividend model. The episode coincided with Bitcoin’s drop to $58,190 on June 25, the token’s lowest level in 21 months, rattling confidence across the broader market.

Hougan called the STRC episode a typical late-cycle event and described it as a failure of financial engineering similar to the collapse of Grayscale’s GBTC premium in 2021. Money seeking high yields and low volatility was used to buy Bitcoin even though the asset offered neither, he said. That capital was never a natural fit for Bitcoin, and it must be cleared out before the market can find a bottom, he added.

After the STRC episode, Strategy said it may sell Bitcoin if necessary to fund dividend payments and increased its dollar reserves to $2.55 billion. Hougan said the move eased immediate concerns but weakened Strategy’s position as an aggressive buyer. He said the company is still expected to remain a net buyer in the next bull market.

Matt Cole, chief executive officer of Strive, disputed the view that the episode was a major issue. Strategy’s 847,363 Bitcoin holdings account for only 4% of total supply, he said. Cole added that under US Securities and Exchange Commission standards, a stake of less than 5% is not considered a significant holding.

Hougan also dismissed the possibility of a liquidity crisis. Strategy has $52 billion of liquid assets and about $7 billion of debt, he said. Bitcoin would need to fall another 70% from current levels, to about $18,500, before the company could be in danger, he added.