Bitwise: Leverage Unwind May Be Forming Bitcoin Market Bottom

Bitwise Chief Investment Officer Matt Hougan wrote in a July 1 analysis that volatility in STRC, a perpetual preferred equity instrument tied to Strategy (Nasdaq: MSTR), reflects a late-cycle leverage unwind and could be creating conditions for a market bottom. Bitcoin has held above $60,000 during the adjustment, trading around $62,741.

STRC was designed to offer high yield while trading near a fixed value. Yield-seeking investors bought the product and Strategy used the proceeds to increase bitcoin exposure on its balance sheet. That structure performed in rising markets but became strained as bitcoin’s price declined.

Hougan described the current phase as removal of excess leverage rather than evidence of lasting weakness in demand. He noted bull markets often produce complex leverage structures that later unwind under stress and identified STRC as an example within a wider deleveraging cycle. He added that some capital that flowed into STRC “never really fit bitcoin,” and that ongoing deleveraging is clearing speculative excess.

He cautioned that a rebound in price does not prove a full cycle reset. Bitcoin’s recovery from lows near $60,000 to the mid-$60,000s can reflect temporary relief during forced deleveraging rather than a durable uptrend. Hougan wrote that STRC’s volatility and spot-market recoveries are part of the same adjustment phase and that short-term stabilization should not be taken as a confirmed trend reversal.

Hougan outlined indicators he would watch for signs of a bottom. One would be MSTR trading at a discount to its net asset value, which he described as a sign that greed has shifted fully into fear. He also pointed to the Crypto Fear and Greed Index falling to record lows and to leverage funding rates turning decisively negative, a condition that would indicate more retail shorting than longing. “As the market continues to sort things out, I’m convinced the bottom is closer than ever-and that we will enter a new bull market in the fall,” he wrote.

Hougan emphasized that bottoms cannot be identified with certainty and said his focus is on whether speculative excess has been cleared rather than on price alone. He concluded that monitoring investor positioning and funding conditions will be key to judging when a durable bottom has formed.