Tom Lee explains why Strategy is used as a hedge against the decline of crypto

Source: CritpoTendencia Original Title: Tom Lee explains why Strategy is used as a hedge against the crypto downturn Original Link: According to analyst Tom Lee, the company Strategy—which holds around 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 consider right now, because it is the Bitcoin proxy, it’s the most liquid name.”

In an environment where native crypto tools for hedging positions face liquidity issues, the stock is positioned as a viable alternative to mitigate declines.

Strategy as a hedging tool in a low-liquidity market

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 crypto derivatives market limited in depth, several funds are turning to this stock to offset their exposure. Lee explained:

“It seems to me that in the world of cryptocurrencies, when they try to hedge their losses in Bitcoin and Ethereum, they can’t find another way to do it except by shorting the liquid stocks that represent them.”

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

Implications for investors and market structure

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

Second, that the liquidity of its stock—and its options chain—enables tactical operations that do not exist in much of the crypto derivatives market. Third, that this interconnection reinforces the crypto sector’s dependence on external players offering indirect hedges, which can amplify the effects of a Bitcoin correction.

Tom Lee also warns that the drop in liquidity after the October 10 market collapse left the system especially vulnerable: “It really paralyzed market makers,” referring to the weakening of these intermediaries’ activity in crypto assets.

As a result, Strategy absorbs part of the hedging pressure that the crypto infrastructure cannot handle internally. Its role, therefore, takes on a dimension that goes beyond the retail investor and can influence the overall market dynamic.

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

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