The digital credit market experienced one of its steepest sell-offs ever on Thursday. Strive Asset Management CEO Matt Cole stated that the sales were due to the liquidation of leveraged positions, not a deterioration in the credit quality of issuers. Strategy’s preferred stock, STRC, fell to $82.50 during the day and then recovered to $89. Strive’s SATA product fell below its nominal value of $ 100, reached below $ 93, and then rose to $ 97.
Emphasis on leveraged sales came to the fore
In his post on X, Cole stated that this was the “most challenging day in the history of Digital Credit.” According to him, the move was a liquidation process triggered by margin calls and forced sales rather than a weakening in key credit indicators. Both products are normally configured to trade close to their face value of $100.
What happened today was a leverage-induced liquidation, not a deterioration in underlying credit quality.
Strive Asset Management, mentioned in the news, is known as a finance company operating in the field of asset management. Cole stated that relatively high returns in the sector led investors to use leverage, and when prices started to fall, collateral calls accelerated forced sales. He argued that this process turned into a self-reinforcing decline disconnected from the ability of issuers to repay.
He drew similarities with historical examples
Cole compared this situation to past hedge fund collapses due to leveraged U.S. Treasury bond positions. With this analogy, he emphasized that even if sharp price movements occur during periods of market stress, the credit quality of the relevant securities does not automatically weaken. According to him, a similar distinction needs to be made here as well.
Liquidation and credit are not the same thing; Although the market has fluctuated, our long-term view on digital credit has not changed.
Cole also said that the company’s dividend reserves are protected and there is no stress on the company. Adding that the company’s basic credit profile has not changed substantially, Cole stated that the rapid reaction following the sales indicates that the demand in the market has not completely disappeared.
Strong buying came from intraday bottoms
The recovery seen after the low levels during the day indicated that buyers stepped in during the sharp decline. Cole said there was significant buying interest following intraday lows in both STRC and SATA. This outlook stood out as an element that shows that the demand for digital credit assets continues despite the fluctuation.
Following the sharp move in the market, attention turned to the level of leverage in similar products and possible additional collateral pressures. Evaluations in the news indicate that the latest decline is due to market structure and positioning rather than credit fundamentals for now.
