Strive CEO Matt Cole said on June 19 that the recent steep sell-off in Strategy\u2019s STRC and his company\u2019s SATA was caused by forced liquidation from leveraged investors and not by any deterioration in the financial strength of the issuers.<\/p>\n
His comments came after one of the most volatile trading sessions the sector has ever seen, with STRC falling to $82.50 and SATA dropping into the low $90s before both recovered as buyers stepped back into the market.<\/p>\n
In a lengthy post on X, the Strive chief called<\/a> Thursday the most difficult day in the history of what he termed Digital Credit. According to him, investors looking for higher yields increasingly borrowed against assets such as STRC and SATA, but when prices started falling, margin calls triggered even more selling, creating a cascade that pushed prices lower regardless of fundamentals.<\/p>\n \u201cWhat happened today was a leverage liquidation event, not a deterioration in underlying credit quality,\u201d he wrote.<\/p>\n He pointed to blowups that happened in the past in leveraged Treasury trades as a parallel, saying those failures had nothing to do with Treasuries becoming bad credits and everything to do with investors overextending themselves while chasing yield on something they assumed was safe.<\/p>\n Talking about Strive specifically, Cole said the firm\u2019s dividend reserves have not been touched and that the company wasn\u2019t under any strain. Further, he pointed out that leveraged flushes aren\u2019t necessarily a signal of weak collateral, since, if anything, they tend to happen because the collateral looked stable enough to tempt people into piling on leverage in the first place.<\/p>\n But when Udi Wertheimer, co-founder of Taproot Wizards, pressed<\/a> Cole on why STRC\u2019s peak had looked weak even before the crash, with the stock only reaching $97 around its last ex-dividend date, he conceded that the demand picture had softened somewhat. He blamed that on a weak Bitcoin market, jitters around Strategy\u2019s recent corporate moves, and unease over the company using cash to pay down a convertible note.<\/p>\n However, Cole also said that the bigger factor was the kind of buying involved.<\/p>\n \u201cIf a security has billions of dollars of demand from long-only institutions, that is very different from demand driven by highly leveraged buyers,\u201d noted the executive. \u201cThe latter can create strong demand on the way in, but also a much sharper unwind when prices move against them as we saw.\u201d<\/p>\n According to him, Strive has one obvious lever with SATA if growth gets ahead of demand, which is to cut the interest rate to slow things down.<\/p>\n Market data shows STRC has since recovered to around $89 after the selloff, which is still some way off its $100 par, putting its effective yield near 13%, with a 30-day volatility of roughly 21%. Meanwhile, SATA, its newer and smaller sibling product, has held up somewhat better and was sitting just above $97 at the time of writing.<\/p>\n Strategy has said that its BTC treasury, currently valued at around $53 billion given Bitcoin\u2019s price near $63,000, is enough to cover<\/a> dividends for 32 years, considering the firm has about $1.7 billion in annual obligations. However, critics like Peter Schiff have often disputed that figure on the grounds that it assumes the cryptocurrency\u2019s price doesn\u2019t fall and the dividend rate doesn\u2019t climb any higher.<\/p>\n The post Strive CEO: Sharp STRC, SATA Drops Were Leverage Liquidations, Not Credit Failures<\/a> appeared first on CryptoPotato<\/a>.<\/p>","protected":false},"excerpt":{"rendered":" Strive CEO Matt Cole said on June 19 that the recent steep sell-off in Strategy\u2019s STRC and his company\u2019s SATA was caused by forced liquidation from leveraged investors and not by any deterioration in the financial strength of the issuers. His comments came after one of the most volatile trading sessions the sector has ever […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-183453","post","type-post","status-publish","format-standard","hentry","category-discovery"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/183453"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=183453"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/183453\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=183453"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=183453"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=183453"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}STRC\u2019s Design Is Getting Stress-Tested<\/h2>\n