Bitwise Chief Investment Officer Matt Hougan published an analysis on July 1 stating that bitcoin market volatility reflects a typical late-cycle leverage unwind rather than structural demand weakness. Hougan argued the current phase involves removing excess leverage built during the rally, a process he identified as historically preceding new bull markets. He cited three specific indicators to watch for bottom formation: Strategy's MSTR trading at a discount to net asset value, the Crypto Fear and Greed Index approaching extreme lows, and leverage funding rates turning negative. Bitcoin has recovered from recent lows near $60,000 to trade around $62,741 on Bitcoin.com Markets, though Hougan distinguished this price recovery from a confirmed cycle reset. The executive concluded that ongoing deleveraging in structured products like Strategy's STRC represents necessary market structure adjustment before a durable bottom can form.
Bitwise CIO Links STRC Volatility to Late-Cycle Leverage Dynamics
Hougan explained that Strategy's STRC, a perpetual preferred equity instrument designed to offer high yield while trading near a fixed value, illustrates late-cycle leverage dynamics rather than systemic failure. The key issue is capital quality, he emphasized. STRC attracted yield-seeking investors, while proceeds were used to fund bitcoin exposure via Strategy's balance sheet. The structure worked in rising markets but weakened as bitcoin declined.
Explaining why he believes the current correction is nearing its end, Hougan said: "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 noted that bull markets often drive increasingly complex leverage structures that later unwind under stress. STRC, he argued, is one example within a broader deleveraging cycle. The executive added that capital flowing into STRC "never really fit bitcoin," and that ongoing deleveraging is removing excess built during the rally, a necessary step before a durable bottom forms.
Bitcoin Rebounds to $62,741 Amid Ongoing Deleveraging Phase
Bitcoin has recovered from recent lows near $60,000, trading around $62,741 on Bitcoin.com Markets. Hougan said this does not confirm a cycle reset. He distinguished between price recovery and market structure. He said prior cycles had seen similar rebounds during ongoing forced deleveraging.
![Bitcoin's price chart via Bitcoin.com Markets]()
Bitcoin's price chart via Bitcoin.com Markets.
From this view, STRC volatility and bitcoin's rebound reflect the same adjustment phase: one in structured yield products, the other in spot markets. Short-term stabilization may reflect temporary relief rather than trend reversal.
Hougan Outlines Three Indicators for Potential Market Bottom
Hougan said bottoms cannot be identified with certainty but outlined indicators to watch. "But there are a few signs that I'd watch for in the near future," he wrote. "One would be MSTR trading at a discount to its net asset value. That would be a sure signal that greed has fully transformed into fear, a ripe condition for a market bottom." He added: "Another signal worth watching is the Crypto Fear and Greed Index; I get bullish as it heads towards all-time lows (i.e. extreme fear)."
"Another would be leverage funding rates turning decidedly negative, indicating more retail interest in shorting bitcoin than going long. In other words, you want it to be so bad it's good," he further shared.
The Bitwise CIO emphasized positioning over price, focusing on whether speculative excess has been cleared. He concluded that STRC volatility fits a late-cycle deleveraging phase that may precede a new bitcoin uptrend.
FAQ
What did Bitwise CIO Matt Hougan say about bitcoin's current market phase on July 1?
Matt Hougan stated that bitcoin market volatility reflects a typical late-cycle leverage unwind rather than structural demand weakness. He argued the current phase involves removing excess leverage built during the rally, a process historically preceding new bull markets. Hougan said "the bottom is closer than ever" and predicted a potential new bull market in the fall.
What three indicators did Hougan identify for watching bitcoin bottom formation?
Hougan outlined three specific signals: Strategy's MSTR trading at a discount to net asset value, the Crypto Fear and Greed Index approaching all-time lows indicating extreme fear, and leverage funding rates turning decidedly negative showing more retail interest in shorting bitcoin than going long.
Why does Hougan say bitcoin's rebound to $62,741 does not confirm a cycle reset?
Hougan distinguished between price recovery and market structure. He noted that prior cycles had seen similar rebounds during ongoing forced deleveraging. From his view, short-term stabilization may reflect temporary relief rather than trend reversal, as the deleveraging process in structured products and spot markets continues.
