Bitwise says Strategy's 4% Bitcoin share fading as institutions step in

Strategy's dominance as Bitcoin's largest corporate holder is giving way to institutional investors, Bitwise Asset Management said, marking a structural shift in demand.

Strategy's role as Bitcoin's dominant buyer is fading, with institutional investors expected to replace the software company as the primary source of demand, Bitwise Asset Management said.

"The volatility in STRC is a natural and important part of the crypto cycle. I think we're nearing the bottom," Matt Hougan, chief investment officer at Bitwise, said in a July 2 blog post.

Strategy's perpetual preferred stock, STRC, fell to about $88 from its $100 par value as investors questioned the company's willingness to maintain dividend payments. The selloff rattled markets, but Hougan argued Strategy remains well-capitalized, with roughly $52 billion in liquid assets against about $7 billion of debt. The company holds 847,363 Bitcoin, or about 4% of total supply, and has purchased roughly $13.7 billion worth of the cryptocurrency year to date, according to JPMorgan estimates.

The shift matters because Strategy has been the single largest marginal buyer of Bitcoin for years. If institutional investors replace Strategy as the primary demand source, Bitcoin's price discovery could become less dependent on one company's capital markets activity and more tied to broad portfolio allocation trends.

A New Capital Framework

Earlier this week, Strategy unveiled a capital framework allowing selective Bitcoin sales to fund preferred dividends, while authorizing preferred share repurchases and stock buybacks. The company set a minimum cash reserve covering 12 months of preferred dividend and interest payments. Its $2.55 billion cash balance currently covers about 17 months.

JPMorgan analysts led by Nikolaos Panigirtzoglou said the policy introduces "two-way" flow risk, adding uncertainty and volatility to crypto markets. The bank argued Strategy should hold cash reserves covering 24 to 36 months of dividend obligations to reassure investors it won't need to sell Bitcoin in the foreseeable future.

Institutional Demand to Fill the Gap

Hougan said the episode marks a broader shift in Strategy's role within Bitcoin markets. Rather than serving as crypto's dominant, one-way buyer, the firm is likely to become a more flexible participant whose Bitcoin purchases or sales depend on market conditions.

Looking ahead, Bitwise expects institutional investors, including asset managers, banks, pensions, endowments and sovereign funds, to replace Strategy as Bitcoin's primary source of demand. U.S. spot Bitcoin ETFs saw record net outflows of $4 billion in June, but Bitwise views this as part of the leverage unwind typical of late-cycle crypto corrections.

Bitcoin traded at about $61,261 as of 16:30 UTC, up 2.7% in the past 24 hours. Hougan said STRC's volatility reflects a late-cycle deleveraging event, with speculative excess being flushed from the system.

This article is for informational purposes only and does not constitute investment advice.