STRC and SATA Plunge Triggered by Margin Calls, Says Cole

TLDR

• Strive CEO Matt Cole said leveraged liquidations, not credit issues, caused the sharp declines in STRC and SATA.
• STRC dropped to $82.50, while SATA fell into the low $90s before both securities rebounded.
• Cole compared the sell-off to past leveraged Treasury trade unwinds driven by margin calls.
• Strive’s dividend reserves remained untouched during the market turmoil, according to Cole.
• Cole acknowledged softer demand for STRC due to Bitcoin weakness and concerns around Strategy’s recent actions.

A sharp sell-off in Digital Credit securities triggered heavy volatility on June 19, pushing STRC and SATA well below recent trading levels. However, Strive CEO Matt Cole said forced liquidations caused the decline, not weakening credit conditions. Both securities later recovered after buyers returned and absorbed the selling pressure.

STRC Sell-Off Stemmed From Margin Calls, Says Strive CEO

Matt Cole described June 19 as the toughest trading day for the Digital Credit market. He said leveraged investors accelerated the decline after margin calls forced additional sales. As a result, STRC fell to $82.50 while SATA dropped into the low $90 range.

Cole stated that the move reflected a leverage event rather than weaker issuer fundamentals.

He also compared the episode to previous leveraged Treasury trade failures that occurred during periods of excessive borrowing.

The Strive executive said investors increasingly borrowed against securities such as STRC and SATA to seek higher yields. However, falling prices triggered margin calls and intensified selling activity. Consequently, liquidation pressure pushed prices lower regardless of underlying credit strength.

Cole also addressed concerns about Strive’s financial position during the market decline. He said the company had not used its dividend reserves during the sell-off. He added that leveraged flushes often occur because investors view collateral as stable enough to support borrowing.

Demand Concerns Emerged Before STRC Decline

Taproot Wizards co-founder Udi Wertheimer questioned why STRC struggled before the broader market decline. He pointed to the security’s peak near $97 around its latest ex-dividend date. Cole acknowledged that demand weakened before the sharp sell-off began.

According to Cole, several factors reduced the appetite for security. He cited Bitcoin market weakness and concerns surrounding Strategy’s recent corporate actions. He also referenced unease about the company using cash to retire a convertible note.

Cole argued that the type of demand matters as much as its size. He said long-only institutional demand behaves differently from leveraged buying activity.

He added that Strive could adjust SATA’s interest rate if growth exceeds demand. According to Cole, lowering the rate would slow expansion and improve balance. He presented that option as a direct tool available to the company.

Market Recovery Lifts STRC and SATA After Volatile Session

Market data showed STRC recovering to around $89 after the sell-off. Even so, the security remained below its $100 par value. Its effective yield stood near 13%, while 30-day volatility approached 21%.

SATA held up better than STRC following the market disruption. The security traded above $97 at the time of reporting. Buyers returned after the liquidation pressure eased across the sector.

Strategy has stated that its Bitcoin treasury can support dividend obligations for decades. The company values its Bitcoin holdings at about $53 billion using a Bitcoin price near $63,000. Strategy also reports roughly $1.7 billion in annual obligations, while critics, including Peter Schiff, continue to challenge those assumptions.

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