Strategy worries deepen crypto selloff as bitcoin falls 20% since May

Bitcoin has fallen about 20% since May, adding pressure to a crypto market already shaken by concerns over Strategy, the largest corporate holder of the token. CoinGecko data cited by Fortune showed bitcoin down about 5% over the past week despite a small rebound in the previous day.

Fortune reported that ether, the second-largest cryptocurrency, has posted similar losses. The total value of the crypto market has dropped 36% over the past year and now sits just above $2 trillion, according to the report.

The selloff has put new attention on Strategy, the company closely associated with Michael Saylor’s long-running bitcoin accumulation strategy. Company data cited by Fortune showed Strategy holding almost $51 billion in bitcoin, equal to roughly 4% of global supply.

Strategy’s own shares have also been hit. Fortune reported that the stock has nearly been cut in half over the past month and recently traded around $85.

Another focus for investors is STRC, a Strategy-linked stock instrument that executive chairman Michael Saylor has promoted, according to Fortune. The instrument, which was built to pay investors a monthly dividend, has fallen below its $100 peg and recently traded a little above $75, Fortune reported.

Matt Hougan, chief investment officer at crypto asset manager Bitwise, told Fortune that investors are concerned STRC’s decline could push Strategy to sell bitcoin to raise cash. Hougan said that fear has weighed on market psychology.

Broader macro concerns are also weighing on digital assets, according to Fortune. The report said consumers have grown more worried about a possible interest rate increase after Federal Reserve Chair Kevin Warsh stressed the need to contain inflation.

Higher rates tend to make speculative assets less attractive because investors can earn more from lower-risk holdings, according to Fortune’s analysis. Crypto prices often react sharply to changing expectations for monetary policy.

Traditional markets were mixed Friday, Fortune reported. The S&P 500 edged higher, the Nasdaq fell 0.6%, and the Dow Jones Industrial Average was little changed.

Hougan told Fortune he sees the latest downturn as evidence that the current slide may be close to ending. He pointed to pressure on digital-asset treasury companies, a group that grew over the past year as public companies added cryptocurrencies in hopes of lifting their stock prices.

That trade has weakened, Hougan told Fortune, as the market forces out excess capital from companies that became too aggressive. His view is that crypto could steady if Congress passes long-awaited legislation for the industry.

Hougan also told Fortune that clearer rules could help support a rebound in the second half of the year, particularly as Wall Street firms continue putting money into blockchain technology.

This story draws on original reporting from Fortune.