Image Credit: Strive
Key Takeaways
- STRC fell as low as $82.50 and SATA dropped below $93 before recovering to $89 and $97 respectively, with both products designed to trade near $100 par value
- Strive CEO Matt Cole attributed the selloff to margin calls triggering forced selling from leveraged investors chasing double-digit yields, not credit deterioration
- Cole confirmed Strive’s dividend reserves remain intact and described the event as a leverage liquidation, explicitly distinguishing it from a credit event
The digital credit market suffered a sharp selloff on Thursday, sending Strategy’s preferred equity STRC as low as $82.50 and Strive’s SATA below $93, before both products rebounded. Strive Asset Management CEO Matt Cole attributed the move to forced selling from leveraged investors rather than any deterioration in issuer credit quality, calling it “the most difficult day in the history of Digital Credit” in a post on X.
STRC and SATA Drop Sharply Below Par Before Rebounding
STRC recovered to $89 and SATA rebounded to $97 by the close. Both products are designed to trade close to their $100 par value and offer double-digit yields. Cole said investors had increasingly used leverage to enhance returns, attracted by those yields. When prices began falling, margin calls triggered forced selling that created a self-reinforcing decline, Cole said, with significant buying interest emerging at the intraday lows.
Cole Describes a ‘Leverage Liquidation Event,’ Not a Credit Deterioration
“What happened today was a leverage liquidation event, not a deterioration in underlying credit quality,” Cole wrote on X.
He drew a comparison to past market dislocations involving leveraged Treasury positions, noting that Treasury securities themselves remained strong credits despite periods of stress. “There is an old saying in income markets that the road to hell is paved with carry,” Cole said, describing how yield-seeking behavior combined with leverage can amplify market dislocations.
Cole Says Firm’s Dividend Reserves and Credit Profile Remain Intact
Cole was direct in separating the market event from any question of issuer solvency. “Our dividend reserves remain intact. Our company is not under stress,” he said, adding that the firm’s underlying credit profile remains largely unchanged. “‘Both STRC and SATA experienced significant buying interest off their intraday lows,” Cole noted. “A liquidation event and a credit event are not the same thing,” he added.
