Leverage liquidations hit digital credit STRC, SATA

A sharp selloff in the digital credit market on Thursday, June 18, triggered extreme volatility for two prominent preferred stocks, STRC and SATA, before both securities rebounded. Strive Asset Management CEO Matt Cole attributed the plunge to forced liquidations by leveraged investors, not a deterioration in the underlying credit quality of the issuers.

Cole described the day as the most difficult in the history of what he termed "Digital Credit." Strategy's STRC fell as low as $82.50, while Strive's SATA dropped into the low $90s. Both products are designed to trade near a $100 par value. The selloff was driven by a cascade of margin calls, Cole explained. Investors seeking higher yields had increasingly borrowed against assets like STRC and SATA. When prices began to fall, those leveraged positions triggered forced selling, which pushed prices lower in a self-reinforcing cycle detached from fundamentals.

"What happened today was a leverage liquidation event, not a deterioration in underlying credit quality," Cole wrote in a post on X. He compared the episode to historical hedge fund blowups involving leveraged U.S. Treasury positions, arguing the underlying collateral...