Strive CEO Matt Cole stated that Thursday's sharp declines in SATA and Strategy's STRC were primarily triggered by forced liquidation of leveraged positions, rather than a deterioration in the underlying credit quality. Both products, which had been trading around a face value of $100, closed at $97.71 and $88.59 respectively.
Increased trading volume accompanied by a drop below par value
Cole described it on X as "the toughest day in the history of digital credit products." He explained that these products tend to attract investors to leverage their holdings when yields are high and volatility is relatively limited; however, once the market reverses, deleveraging can quickly amplify the decline.
On that day, trading volumes for SATA and STRC reached $153 million and $941 million respectively, both at their respective historical highs. Market analysts judged that this round of decline was more like a passive withdrawal of funds than a sudden deterioration in fundamentals.
A rebound occurred after the intraday low.
Walton, a Strive representative, also stated on X that leverage in the market appears to have been largely cleared out, but the product fundamentals remain intact. He noted that both instruments received consistent buying support throughout the session, and prices subsequently rebounded from their lows.
According to Cole's disclosure, STRC fell to $82.50 at one point during the session before rebounding significantly; SATA, on the other hand, fell from near par value to just over $90 before recovering. Walton also mentioned that compared to larger preferred securities such as JPMorgan JPM.PD and BlackRock PFF, these two products have lower liquidity on weekdays, making them more prone to sharp fluctuations during deleveraging.
Dividend arrangements still suppress STRC
Aside from leverage, the recent weakness of STRC is also related to the uncertainty surrounding its dividend payment method. Decrypt quoted analysts as saying that 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.
Both SATA and STRC are designed to help issuers raise more funds to continue accumulating Bitcoin. Compared to directly holding common stock or Bitcoin itself, these products attempt to offer investors dividend income and relatively lower volatility.
Additional information:The report mentioned that Strategy sold 32 bitcoins last month, cashing out approximately $2.5 million. The market interprets this as evidence that the company is not entirely ruling out selling bitcoins to meet funding or dividend needs.
