Bitcoin’s latest decline has renewed concerns over whether the market is entering a longer bear phase. The asset has fallen for two straight quarters, while Strategy’s unrealized loss and pressure on its preferred shares have added another source of risk.
Bitcoin fell about 22% in the first quarter and 12.2% in the second quarter. A third negative quarter would mark its first run of three straight quarterly losses since 2022, when Bitcoin ended the year more than 65% lower.
Bitcoin Enters a Critical Third Quarter
Bitcoin recently fell below $59,000 as traders reduced exposure to risky assets. The decline has raised doubts about whether the current move is a normal pullback or part of a wider downtrend. Market observers are asking if it is still too early to call the current risk-off phase anything apart from a full-blown bear market, as quarterly losses deepen. The comparison with 2022 has gained attention since Bitcoin has not recorded three bearish quarters in a row since that cycle.
The third quarter may now become a key test. Another quarterly loss would place Bitcoin in a pattern last seen in its worst annual decline. Nevertheless, the current drop remains smaller than the 2022 collapse, and the final outcome will depend on price movements through September.
Selling pressure has also spread to companies linked to Bitcoin. Strategy’s common shares recently dropped below $85.50 and closed near $82 on Friday, their lowest level since February 2024.
Strategy’s Funding Model Comes Under Pressure
Strategy holds one of the largest corporate Bitcoin reserves, but falling prices have left the company with about $14 billion in unrealized losses. Its STRC preferred shares also carry an 11.5% annual dividend, equal to roughly $1.2 billion in yearly payments. STRC was designed to trade near $100 and provide Strategy with funds for more Bitcoin purchases. Yet the shares fell as much as 26% below that level and reached a record low. The drop has raised doubts about the company’s ability to issue more shares on favorable terms.
CryptoQuant said Strategy should pause Bitcoin purchases and rebuild its cash holdings. The firm estimated that cash coverage for STRC dividends has fallen from more than seven years to about 14 months. When STRC trades below its intended value, new issuance becomes less attractive. Strategy has therefore paused that part of its funding process. Analyst Mark Palmer said the model has become “less efficient” rather than broken and rejected comparisons with failed crypto projects.
Ripple CEO Questions Strategy’s Bitcoin Approach
Ripple CEO Brad Garlinghouse said he remains bullish on Bitcoin but criticized Strategy’s preferred-share model. In a Friday interview, he described the structure as “financial engineering” that had distracted the market from long-term utility. “Financial engineering does not drive long-term value,” Garlinghouse said. He added that a digital asset’s value should come from practical use rather than complex funding structures. Garlinghouse called STRC’s fall below its $100 target a “damning indictment” of Strategy’s approach, focusing on the company’s financing method rather than Bitcoin itself.
Meanwhile, Arkham Intelligence said the situation does not resemble the Terra-LUNA collapse. Still, falling Strategy shares, weak STRC demand, and reduced funding capacity have raised doubts about future Bitcoin purchases.
Bitcoin now enters the third quarter under pressure from lower prices and tighter funding conditions. A third straight quarterly loss would create a pattern not seen since the 2022 bear market.
