Digital Credit Market Tumbles as Strive CEO Cites Forced Deleveraging Pressure

Matt Cole said the sharp drop in STRC and SATA was driven by forced selling from leveraged investors, with both assets later recovering part of their losses.

The digital credit market saw one of its most severe selloffs on Thursday, which Strive Asset Management CEO Matt Cole attributed to leverage-driven liquidations rather than any weakening 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 STRC fell to around $82.50 before rebounding to $89, while Strive’s SATA dropped below $93 and later recovered to $97. Both products are designed to trade near a $100 par value.

Cole emphasized that the move reflected a liquidation event rather than a deterioration in credit quality, arguing that issuer fundamentals remained intact.

He explained that investors attracted by double-digit yields had increasingly used leverage to enhance returns. As prices fell, margin calls triggered forced selling, which accelerated the decline in a self-reinforcing loop unrelated to credit strength.

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

Cole also drew parallels with past hedge fund blowups involving leveraged Treasury trades, noting that even during periods of stress, the underlying government bonds remained fundamentally sound.

He added that the companies’ financial positions remain strong, 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 notable buying interest after hitting intraday lows, helping drive their rebound, he noted.

Cole concluded that investors should distinguish between liquidity-driven liquidation events and true credit deterioration, reaffirming his long-term confidence in the digital credit market despite recent volatility.