Tom Lee explains why Strategy is used as a hedge against the fall of cryptocurrencies.

Source: CritpoTendencia Original Title: Tom Lee explains why Strategy is used as a hedge against the decline of cryptocurrencies Original Link: According to analyst Tom Lee, the company Strategy —which holds nearly 650,000 BTC on its balance sheet— is being used by institutional investors as a “pressure valve” within the cryptocurrency market.

Lee pointed out that “Strategy is probably the most important company to watch right now, because it is the proxy for Bitcoin, it is the most liquid name.”

In an environment where native crypto tools for covering positions present liquidity issues, action positions itself as a viable alternative to mitigate declines.

Strategy is a hedging tool in a market with low liquidity

The 43% drop in the price of Strategy over the past month reflects, according to Lee, its active role as a hedging instrument against losses in Bitcoin and Ethereum.

With a limited depth crypto derivatives market, several funds are resorting to this action to hedge their exposure. Lee explained:

“It seems to me that in the world of cryptocurrencies, when they try to cover their losses in Bitcoin and Ethereum, they cannot find another way to do so except by short selling the liquid stocks that represent them.”

This phenomenon exposes a structural tension: the lack of liquid alternatives for direct coverage within the crypto ecosystem drives the use of indirect vehicles like Strategy.

Implications for investors and market structure

From a technical point of view, the strategy of using Strategy as a hedge proxy reveals three key elements. First, that a company functioning as a “Bitcoin proxy” depends both on the behavior of the cryptocurrency and on its own financial performance.

Second, the liquidity of its action —and its chain of options— allows for tactical operations that do not exist in much of the crypto derivatives market. Third, this interconnection reinforces the crypto sector's dependence on external actors who offer indirect coverage, which can amplify the effects of a Bitcoin correction.

Tom Lee also warns that the decline in liquidity following the market collapse left the system especially vulnerable: “It really paralyzed market makers…”, referring to the weakening of the activity of these intermediaries in crypto assets.

Consequently, Strategy absorbs part of the coverage pressure that the crypto infrastructure cannot handle internally. Its role, therefore, takes on a dimension that exceeds that of the retail investor and can influence the overall market dynamics.

In conclusion, Tom Lee's vision suggests that in an ecosystem where the cryptocurrency derivatives market faces significant limitations, stocks with a high correlation to Bitcoin may become key hedging tools.

For professionals in the crypto market and risk management, this trend invites a review not only of exposure to Bitcoin but also of the complete architecture of hedging strategies in such a volatile and interconnected environment as the current one.