Foreign media reports that the "digital credit" market built around preferred shares by Bitcoin treasury companies recently faced its first significant stress test. Strategy's STRC and Strive's SATA both plummeted during trading on June 18th. Although they subsequently recovered some of their losses, this volatility has prompted the market to reassess the stability of such products.
The article argues that while the issuer's explanation of attributing the decline to leveraged liquidation rather than credit deterioration may not be wrong, it does not eliminate the risk itself. For a product that originally aimed to attract investors with stable returns close to par value, a single-day intraday drop of nearly 20% already indicates that its trading structure is not robust.
Both products experienced significant fluctuations on the same day.
On June 18, Strategy's perpetual preferred stock, STRC, fell to $82.50 intraday, significantly below its par value of approximately $100, before recovering to close at around $88.59. During the same period, Strive's SATA also fell from near par value to just over $90, reaching a low of around $92.88 intraday before recovering to around $97.71.
Foreign media pointed out that these products were originally packaged as high-yield, relatively stable income securities, behaving more like high-yield bonds or preferred stocks than highly volatile assets. The sharp drop and rebound of the two products on the same trading day indicates that their price performance is not entirely consistent with their positioning as "stable income instruments."
High returns are linked to Bitcoin holdings.
Both STRC and SATA are perpetual preferred stocks with no fixed maturity date, attracting investors through continuous dividend payments. STRC's yield is approximately 11.5%, with dividends paid semi-monthly; SATA's floating yield is approximately 13%, with a higher dividend frequency.
However, the key to these products lies not in the dividend design, but in the use of funds. The companies issuing these preferred shares all have Bitcoin accumulation as their core strategy. In other words, investors are buying a seemingly credit- and yield-oriented security, but underneath it is connected to a highly volatile Bitcoin balance sheet.
Weak liquidity amplifies selling pressure
The issuer emphasized that there was no default and the fundamentals had not deteriorated; the sell-off was mainly due to margin pressure and forced selling. Foreign media believe this explanation has some merit, as both products saw a significant rebound before the close, unlike typical credit events.
However, the core concern of the article is that even if this is not a credit issue, the market has already seen another layer of risk: these types of products have shallow trading and low liquidity, and once combined with leveraged funds and the volatility of Bitcoin itself, the price may quickly deviate from the face value.
Bitcoin also fell back to around $62,900 that day, with the overall market weak and the US stock market closed for the following day due to the upcoming holiday weekend. In this environment, weak liquidity amplified selling pressure. For products that rely on the narrative of "stable returns" to attract funds, this structural vulnerability itself is a risk exposure.
Higher coupon rates correspond to higher risks.
Foreign media believe that the significance of this volatility lies not only in the short-term sharp decline of the two securities, but also in the fact that it allowed the market to see for the first time the cost of so-called "digital credit" products. The higher coupon rate is not an unconditional return, but rather a compensation for insufficient liquidity, leverage chains, and Bitcoin price volatility.
If this type of security continues to expand in the future, investors may no longer focus solely on dividend frequency and nominal yield, but will also pay more attention to trading depth, financing structure, reserve arrangements, and whether a Bitcoin pullback will trigger another chain of sell-offs.
