Digital Credit Market Plunges in Massive Selloff as Strive CEO Points to Forced Liquidations

Matt Cole attributed the sharp declines in STRC and SATA to forced selling by leveraged investors, with both products later recovering part of their losses.

The digital credit market experienced one of its steepest selloffs on record Thursday, which Strive Asset Management CEO Matt Cole said was driven by leverage-based liquidations rather than any deterioration in credit fundamentals.

In a post on X, Cole described the session as “the most difficult day in the history of Digital Credit,” noting that Strategy’s preferred equity STRC fell to around $82.50 before rebounding to $89, while Strive’s SATA dropped below $93 before recovering to $97. Both instruments are intended to trade near a $100 par value.

Cole emphasized that the move reflected a liquidation cascade rather than weakening credit quality, stating that underlying fundamentals remained intact.

He explained that investors attracted by the double-digit yields in the sector had increasingly used leverage to amplify returns. As prices declined, margin calls forced liquidations, accelerating the downturn in a feedback loop unrelated to issuer credit strength.

“There is an old saying in income markets that the road to hell is paved with carry,” Cole said.

He also compared the episode to past hedge fund failures involving leveraged Treasury trades, noting that government bonds themselves remained sound despite temporary market stress.

According to Cole, the firms’ financial positions remain stable. “Our dividend reserves remain intact. Our company is not under stress,” he said, adding that core credit conditions were unchanged.

He further noted that both STRC and SATA saw strong buying interest after hitting intraday lows, helping drive their recovery.

Cole concluded that a liquidation event should not be confused with a credit event, reaffirming his long-term confidence in the digital credit space despite recent volatility.