Strive CEO Matt Cole said that Thursday's sharp decline in SATA and STRC, under Strategy, was primarily triggered by passive liquidations of leveraged positions, rather than a deterioration in underlying credit quality. Both products were originally trading around their $100 face value but closed at $97.71 and $88.59, respectively.
Increased trading volume accompanied by a break below par value
Cole on X called it "the toughest day in the history of digital credit products." He noted that such products tend to attract leveraged investor positions when yields are high and volatility is relatively low, but once market conditions reverse, deleveraging rapidly amplifies losses.
On that day, the trading volumes for SATA and STRC reached $1.53 billion and $9.41 billion, respectively, both within their respective historical highs. Market participants interpreted this decline as more likely a passive outflow of capital rather than a sudden deterioration in fundamentals.
A rebound occurred after the intraday low.
Walton, a person associated with Strive, also stated on X that leverage in the market appears to have been concentratedly cleared, but the fundamental aspects of the products remain intact. He noted that both instruments continued to receive buying pressure during trading, with prices subsequently recovering from their lows.
According to Cole’s disclosure, STRC dropped as low as $82.50 intraday before rebounding significantly; SATA fell from near par to just above $90 before recovering. Walton also noted that, compared to larger-scale preferred securities such as JPM.PD and PFF, these two products typically have lower liquidity, making them more susceptible to sharp fluctuations during deleveraging.
Dividend arrangements continue to suppress STRC
Excluding leverage factors, STRC’s recent weakness is also linked to uncertainty surrounding its dividend payment method. According to Decrypt, citing analysts, it is not uncommon for STRC to trade below par value after the ex-dividend date, but the market is currently more focused on how Strategy will fulfill its dividend obligations.
SATA and STRC are both designed to help issuers raise additional funds to continue accumulating Bitcoin. Compared to directly holding common stock or Bitcoin itself, these products aim to provide investors with dividend-like income and relatively lower volatility.
Additional information: The report noted that Strategy sold 32 bitcoins last month, cashing out approximately $2.5 million. The market interprets this as indicating that the company does not entirely rule out selling bitcoins when fulfilling funding requirements or dividend obligations.