Digital Credit Market Hit by Sharp Selloff; Strive CEO Blames Leverage Liquidations
In brief
- Digital credit market experienced sharp selloff Thursday; STRC fell to $82.50, SATA below $93 before recovery.
- Strive CEO Matt Cole attributed decline to leverage-driven liquidations, not deteriorating credit quality.
- Cole confirmed dividend reserves intact and credit profile unchanged, comparing event to historical leveraged Treasury blowups.
The Selloff and Rebound
Strategy's preferred equity STRC fell as low as $82.50 before recovering to $89, while Strive's SATA dropped below $93 before rebounding to $97. Both products are designed to trade close to their $100 par value and offer over double digit yields. The intraday swings reflected the mechanics of forced selling rather than a fundamental break in the underlying credit markets.
Investors attracted by the sector's relatively high yields increasingly used leverage to enhance returns. When prices began falling, margin calls triggered forced selling, creating a self-reinforcing decline. Cole compared this dynamic to historical hedge fund blowups involving leveraged U.S. Treasury positions. The episode illustrates how leverage can amplify moves in smaller, less liquid markets.
"What happened today was a leverage liquidation event, not a deterioration in underlying credit quality" — Matt Cole, Strive Asset Management CEO
Strive's Position Intact
Cole emphasized that Strive's dividend reserves remain intact and the company is not under stress. The firm's underlying credit profile remains largely unchanged. Both STRC and SATA experienced significant buying interest off their intraday lows, suggesting that the recovery was driven by investors viewing the dislocation as temporary.
The broader digital asset market showed mixed signals. In May, combined exchange volumes fell 3.45% to $4.41T, the lowest since September 2024. Yet RWA perpetual futures volumes rose 10.4% in May, hitting a new all-time high, signaling continued appetite for real-world asset exposure despite the recent volatility.
