Strive Says Strategy-Linked Digital Credit Selloff Was Driven by Liquidations, Not Credit Weakness

Digital credit products tied to Strategy’s bitcoin-backed ecosystem experienced sharp price declines last week before staging a significant recovery, according to Strive Chief Risk Officer Jeff Walton. Despite the volatility, Strive maintains that the selloff was caused by leverage-driven liquidations rather than any deterioration in the underlying credit quality of the assets.

Speaking with CoinDesk’s Jennifer Sanasie on the Public Keys program, Walton explained that Strategy’s preferred stock funding vehicle, STRC, dropped to as low as $82.53 on Thursday before rebounding to approximately $90.50. Meanwhile, Strive’s SATA security fell into the low $90 range before recovering to around $98.59.

According to Walton, market data indicates that the decline was primarily fueled by investors selling their positions, which then triggered forced liquidations across traditional financial markets. He emphasized that decentralized finance (DeFi) protocols were not the source of the disruption. Strive CEO Matt Cole previously described the episode as a “leverage liquidation event, not a credit failure.”

The selloff coincided with unusually high trading activity. Walton noted that STRC recorded nearly $950 million in trading volume on Thursday, while SATA generated roughly $150 million. For comparison, he said BlackRock’s Preferred Securities ETF (PFF) traded about $77 million during the same period. Strive views this level of liquidity as a positive development, arguing that strong trading volume demonstrates growing market depth and institutional interest.

Walton also suggested that some investors rotated capital between SATA and STRC as their yields converged. He believes digital credit instruments offer greater transparency because markets can continuously evaluate risk and pricing in real time.

Looking ahead, Strive remains bullish on the long-term potential of digital credit markets. Walton stressed that SATA and STRC are credit products rather than stablecoins and highlighted Strategy’s stronger financial position compared with the 2022 bitcoin bear market. He said the company currently operates with roughly 10% leverage, significantly lower than the approximately 130% leverage seen during the previous cycle.

As investor understanding of digital credit products improves, Walton expects prices to gradually move back toward their $100 target level, reinforcing Strive’s view that the recent volatility does not undermine the sector’s long-term growth prospects.