Key facts
- Strive CEO Matt Cole stated that Thursday was the most difficult day in the history of digital credit.
- Cole attributed the price plunges of Strive's SATA and Strategy's STRC to a leverage liquidation event.
- SATA and STRC fell significantly below their $100 par values, closing at $97.71 and $88.59 respectively.
- Both SATA and STRC experienced significant trading volumes, suggesting a leverage unwind.
- Arca CIO Jeff Dorman suggested Strategy may sell Bitcoin or MicroStrategy stock to address capital structure concerns.
Digital credit products, including Strive's SATA and Strategy's STRC, experienced a severe selloff on Thursday, with Strive CEO Matt Cole attributing the declines to leverage liquidation events rather than a deterioration of underlying credit quality. Both securities, designed to trade around $100, fell significantly below par, with STRC closing at $88.59 and SATA at $97.71. These products are designed to offer attractive yields with limited volatility, often attracting investors who leverage their positions. The substantial trading volumes for SATA and STRC on Thursday suggest a forced unwinding of these leveraged positions. Arca CIO Jeff Dorman raised concerns that Strategy might need to sell Bitcoin or MicroStrategy stock to address its capital structure, estimating a 25% probability of a significant Bitcoin sale and a 70% probability of selling MicroStrategy stock.
