Matt Hougan is the chief investment officer at Bitwise. He believes that Strategy’s dominance as the Bitcoin buyer could be over following STRC’s turmoil last week, when the uncertainty surrounding the firm’s Bitcoin purchasing strategy led to the currency falling to nearly a two-year-low.
“For years, Strategy has been the most dominant Bitcoin buyer in the world and a one-way source of Bitcoin demand. Those days are likely over,” Hougan said Thursday.
“I just expect it to be a less important figure in Bitcoin in the next cycle than it was in the last,” Hougan stated that it is likely that asset managers, investment banks and pensions will replace Strategy, as the main demand drivers for Bitcoin.
Confidence in Strategy’s Bitcoin-buying model weakened late last month when its main perpetual preferred stock offering — Stretch (STRC) — broke sharply from its $100 par value to below $75, raising fears that its dividend model was unsustainable.
STRC’s incident occurred at the same time that Bitcoin (BTC), a digital currency, fell to its lowest level in 21 months of $58,190. This further rattled confidence on the cryptocurrency market.
Strategy has responded to the Bitcoin crisis by selling Bitcoins where needed to fund dividends By expanding its US dollar reserve to $2.55 billion — easing immediate concerns but weakening its position as the industry’s most aggressive Bitcoin buyer, Hougan said.
Hougan still believes that Strategy will be successful. “net buyer” In the future, there will be a bull run.
Gordon Grant, portfolio manager at Bitwise (left) and Hougan (right), discussing Strategy. Future outlook for STRC Source: Bitwise
STRC is an example “financial engineering” Something has gone wrong
Hougan described STRC as “classic end-of-cycle dynamics” Its collapse was compared to that of “financial engineering” Grayscale’s GBTC Premium collapsed in 2021.
“Money searching for high yields and low volatility was used to buy Bitcoin, which offers neither,” Hougan said. “This money never really fit Bitcoin. And so, it needs to be cleared out before we can find a bottom. That’s what’s happening today.”
Strive CEO: STRC’s strategy issue is overblown
Strive’s CEO Matt Cole however said that Strategy’s incident with STRC had drawn far too much media coverage and has pushed Bitcoin’s value lower than should be the case.
Related: Bitcoin doesn’t need Ethereum-style yield, says Strategy’s Michael Saylor
Cole Geraci spoke to Nate Geraci the president of NovaDius Wealth Management Thursday. noted Strategy’s 847.363 Bitcoin represent just 4% the supply. Bitcoin, however, is not a publicly traded company in the US. Securities and Exchange Commission’s By standard, a stake of 4% would not be material.
“If one person owned 4%, you don’t even have to report that publicly to the SEC because the SEC deems 4% to be immaterial. They start to view a position to be material at 5%.”
Hougan’s strategy doesn’t confront liquidity risks
Hougan said that the STRC is not a concern. $52 billion worth of liquid assets Bitcoins would have to fall another 70% (around $18,500), for the business to be at risk.
Hougan noted also that, if Strategy started selling Bitcoins today, they could pay dividends on STRC as well as its perpetual preferred stocks for the next twenty-eight years.
Magazine: Bitcoin decouples from tech stocks, Ether eyes ‘selling wave’: Market Moves
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Source: cointelegraph.com
