The digital credit market experienced its sharpest selloff to date on Thursday, with Strive Asset Management CEO Matt Cole attributing the decline to a "leverage liquidation event" rather than deteriorating credit fundamentals. Strategy's preferred equity STRC fell as low as $82.50 before recovering to $89, while Strive's SATA dropped below $93 before rebounding to $97. Both products are designed to trade near their $100 par value. Cole explained that investors attracted by double-digit yields increasingly used leverage, and when prices fell, margin calls triggered forced selling, creating a self-reinforcing decline. He compared the event to historical hedge fund blowups involving leveraged U.S. Treasury positions, noting that Treasury securities remained strong credits despite market stress. Cole emphasized that dividend reserves remain intact and the company is not under stress. Both STRC and SATA rebounded sharply from intraday lows, indicating strong buying interest and continued demand for digital credit assets. Cole stated that "a liquidation event and a credit event are not the same thing," maintaining his long-term conviction in the sector.

Key facts

• Leverage liquidation triggered sharp selloff in digital credit products STRC and SATA.
• Both products rebounded from intraday lows, showing strong buying interest.
• CEO Cole compared event to historical hedge fund blowups from leveraged Treasuries.
• Dividend reserves remain intact; firm credit profile unchanged.
• Cole maintains long-term conviction: 'a liquidation event and a credit event are not the same thing.'

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