The digital credit market suffered one of its sharpest sell-offs to date on Thursday,
with Strive Asset Management CEO Matt Cole describing the move as a leverage-driven liquidation rather than a sign of weakening credit fundamentals.
Cole said it was “the most difficult day in Digital Credit’s history,” in a post on X, as Strategy’s preferred stock STRC fell as low as $82.50 before reversing to $89, while Strive’s SATA fell from its par, falling below $93 before returning to $97. Both products are designed to trade close to their par value of $100
“What happened today was a leverage liquidation event, not a deterioration in underlying credit quality,” Cole wrote.
Investors attracted by the sector’s relatively high yields (both products offer above double-digit returns) increasingly used leverage to boost returns, according to Cole. As prices began to fall, margin calls triggered forced selling, creating a self-reinforcing decline separate from the issuers’ underlying creditworthiness.
“There’s an old saying in income markets that the road to hell is paved with carry,” he said.
