“Digital credit” preferred share offerings from Bitcoin treasury firms suffered their worst day ever on Thursday, according to Strive CEO Matt Cole, who called out leveraged positions as the culprit behind price plunges while defending the quality of the underlying credit instruments.
According to Cole, when investors see an attractive yield opportunity with limited volatility, they often seek to lever up, or increase their position with borrowed capital.
What happened today was a leverage…
“Many eventually decide that owning it is not enough. They borrow against it. They lever it,” he wrote. “That works until it doesn't.”
Walton suggested those figures, when compared to the much smaller daily trading volumes from larger preferred equity instruments like JPMorgan’s JPM.PD and Blackrock’s PFF make a leverage unwind more likely.
Both SATA and STRC are designed to trade around $100 per share, but during Thursday’s trading period, SATA sank as low as $92.88 while STRC dipped even further, finding a daily bottom of $82.53 before closing at $88.59.
At the close of trading on Thursday, MSTR had fallen a further 3.46% to $112.53, now down more than 32% in the last month of trading. Shares in Strive (ASST) fell 3.8% to $14.85, moving its monthly losses to nearly 6%. U.S. markets are closed Friday for the Juneteenth federal holiday.
A representative for Strive did not immediately respond to Decrypt’s request for comment.
