Earlier this week, Strategy unveiled a capital framework allowing selective sales of Bitcoin to fund preferred dividends, while allowing preferred stock repurchases and stock repurchases. It also set a minimum cash reserve covering 12 months of preferred dividends and interest payments. Its cash balance of $2.55 billion currently covers about 17 months.
Hougan said this episode marks a broader shift in the role of strategy in Bitcoin markets. Rather than serving as the dominant, one-way buyer of crypto, the company will likely become a more flexible participant whose purchases or sales of bitcoin depend on market conditions.
Looking ahead, Bitwise believes that institutional investors, including asset managers, banks, pensions, endowments, and sovereign wealth funds, are positioned to replace the strategy as the primary source of demand for Bitcoin.
More broadly, STRC volatility is seen as part of the leverage unwinding that typically marks the latter stages of each crypto cycle. As speculative excesses are removed from the system, the market moves closer to establishing a sustainable floor, although the exact timing remains impossible to predict, the report adds.
Wall Street bank JPMorgan said Strategy’s new policy allowing selective sales of Bitcoin to fund preferred dividends creates avoidable two-way risk, increasing market uncertainty and volatility.
Learn more: JPMorgan Says Strategy’s Bitcoin Sales Policy Adds “Two-Way Risk” to Crypto Markets
