The digital credit market experienced one of its most significant selloffs to date on Thursday, with Strive Asset Management CEO Matt Cole attributing the downturn to leverage-driven liquidations rather than any deterioration in credit fundamentals. Cole characterized the day as «the most challenging in the history of Digital Credit» in a post on X, highlighting that the strategy’s preferred equity STRC plummeted to $82.50 before bouncing back to $89, while Strive’s SATA dropped below $93 from its par value, later recovering to $97. Both products are intended to trade near their $100 par value.
Cole emphasized that the day’s events were a «leverage liquidation event,» not indicative of a decline in the underlying credit quality of issuers. He pointed out that investors drawn to the sector’s relatively high yields (with both products offering double-digit returns) increasingly employed leverage to amplify their returns. When prices began to drop, margin calls prompted forced selling, leading to a self-reinforcing decline that was disconnected from the issuers’ actual creditworthiness.
«There’s an old saying in income markets that the road to hell is paved with carry,» he remarked. Cole likened this incident to past hedge fund collapses involving leveraged U.S. Treasury positions, asserting that Treasury securities maintained their strength as credits despite market stress.
«Our dividend reserves remain intact. Our company is not under stress,» he reassured, noting that the firm’s credit profile has largely remained stable. The swift recovery from intraday lows indicates that buyers entered the market aggressively as prices fell. «Both STRC and SATA saw substantial buying interest off their intraday lows,» Cole observed.
He reiterated that a liquidation event should not be confused with a credit event, maintaining his long-term confidence in digital credit despite the recent market volatility.
In May, combined exchange volumes dropped by 3.45% to $4.41T, marking the lowest level since September 2024, while RWA perpetual futures volumes increased by 10.4%, achieving a new all-time high.
