Digital credit markets suffered one of the steepest declines ever on Thursday.
Strive Asset Management CEO Matt Cole described the move as a leveraged liquidation rather than a sign of weakening credit fundamentals.
Cole said in a post on X that the day was “the most difficult day in digital credit history,” as Strategies’ preferred stock STRC fell to $82.50 before recovering to $89, while Strive’s SATA fell from its par, dropping below $93 before recovering to $97. Both products are designed to trade near their face value of $100
“What occurred today was a leverage liquidation event, not a deterioration in underlying credit quality,” Cole wrote.
Mr. Cole said investors, attracted by the sector’s relatively high yields (both products offer double-digit yields or higher), increasingly used leverage to boost returns. As prices began to fall, margin calls triggered forced selling, causing a self-reinforcing decline that was decoupled from the issuer’s underlying creditworthiness.
“There’s an old saying in income markets that the road to hell is paved with carries,” he said.
