Matt Cole said the sharp drop in STRC and SATA was driven by forced selling from leveraged investors, with both assets later rebounding after the initial move lower.
The digital credit market went through one of its steepest selloffs on Thursday, which Strive Asset Management CEO Matt Cole attributed to leverage-related liquidations rather than any deterioration in credit fundamentals.
Posting on X, Cole called it “the most difficult day in the history of Digital Credit,” noting that Strategy’s preferred equity STRC fell to around $82.50 before recovering to $89, while Strive’s SATA slipped below $93 before rebounding to $97. Both products are structured to trade near a $100 par value.
Cole emphasized that the move reflected a liquidation event rather than weakening credit quality, arguing that the underlying issuers remain fundamentally stable.
He explained that investors attracted to the sector’s double-digit yields had increasingly used leverage to enhance returns. As prices declined, margin calls triggered forced selling, creating a cascading effect that was disconnected from actual credit risk.
“There is an old saying in income markets that the road to hell is paved with carry,” he said.
Cole also compared the episode to past hedge fund blowups involving leveraged Treasury positions, noting that even during periods of stress, the underlying government bonds remained strong assets.
He added that the firms’ financial positions remain solid, saying, “Our dividend reserves remain intact. Our company is not under stress,” and reiterated that core credit conditions were unchanged.
Both STRC and SATA saw significant buying interest after hitting intraday lows, helping fuel their recovery, he noted.
Cole concluded that investors should distinguish between liquidity-driven selloffs and true credit events, reaffirming his long-term confidence in the digital credit market despite recent volatility.
