Strive CEO: Sharp STRC, SATA Drops Were Leverage Liquidations, Not Credit Failures
Strive CEO Matt Cole stated on June 19 that the recent sharp sell-off in Strategy’s STRC and his company’s SATA was driven by forced liquidations from leveraged investors, rather than any decline in the issuers’ financial strength.
His remarks followed one of the most volatile trading sessions the sector has experienced. STRC plummeted to $82.50 and SATA dropped into the low $90s before both instruments recovered as buyers re-entered the market.
In an extensive post on X, the Strive chief described Thursday as the most challenging day in the history of what he termed “Digital Credit.” He explained that investors seeking higher yields had increasingly borrowed against assets like STRC and SATA. However, as prices began to fall, margin calls triggered further selling, creating a cascade effect that depressed prices irrespective of underlying fundamentals.
“What happened today was a leverage liquidation event, not a deterioration in underlying credit quality,” Cole wrote.
He drew a parallel to past failures in leveraged Treasury trades, arguing that those collapses were not due to Treasuries becoming bad credits but rather to investors overextending themselves while chasing yield on assets they perceived as safe.
Regarding Strive specifically, Cole asserted that the firm’s dividend reserves remained untouched and that the company was not under any financial strain. He further noted that leveraged sell-offs are not necessarily indicative of weak collateral. In fact, he suggested, they often occur because the collateral appeared stable enough to entice investors to pile on leverage in the first place.
However, when pressed by Udi Wertheimer, co-founder of Taproot Wizards, on why STRC’s peak had appeared weak even before the crash, with the stock only reaching $97 around its last ex-dividend date, Cole conceded that demand had softened somewhat. He attributed this to a weak Bitcoin market, jitters surrounding Strategy’s recent corporate actions, and unease over the company’s use of cash to pay down a convertible note.
Cole also emphasized that a more significant factor was the nature of the buying activity.
“If a security has billions of dollars of demand from long-only institutions, that is very different from demand driven by highly leveraged buyers,” the executive observed. “The latter can create strong demand on the way in, but also a much sharper unwind when prices move against them as we saw.”
According to Cole, Strive possesses a straightforward mechanism with SATA to manage situations where growth outpaces demand: reducing the interest rate to slow down activity.
Market data indicates that STRC has since recovered to approximately $89 following the sell-off. This figure remains below its $100 par value, placing its effective yield near 13% with 30-day volatility around 21%. Meanwhile, SATA, its newer and smaller counterpart, has shown more resilience, trading just above $97 at the time of this report.
Strategy has stated that its Bitcoin treasury, currently valued at around $53 billion given Bitcoin’s price near $63,000, is sufficient to cover dividends for 32 years, considering the firm’s annual obligations of approximately $1.7 billion. Critics, such as Peter Schiff, have frequently challenged this projection, arguing that it assumes Bitcoin’s price will not decline and the dividend rate will not increase.
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