Strive says digital credit selloff was a liquidation event, not a credit crisis

Latest developments: Digital credit products tied to Strategy’s bitcoin-backed ecosystem suffered steep declines last week before partially recovering.

• Strategy’s preferred stock funding vehicle STRC fell as low as $82.53 on Thursday before rebounding to roughly $90.50, according to Strive Chief Risk Officer Jeff Walton.
• Strive’s SATA dropped into the low $90 range before recovering to about $98.59.
• Walton attributed the move to leverage liquidations and heavy selling pressure rather than deterioration in the underlying credit quality.
• CEO Matt Cole previously described the episode as a “leverage liquidation event, not a credit failure.”
• CoinDesk’s Jennifer Sanasie interviewed Strive Chief Risk Officer, Jeff Walton on Public Keys.

What happened: Strive’s analysis points to forced selling rather than a breakdown in decentralized finance markets.

• Walton said trading data suggests holders sold the instruments, triggering liquidations elsewhere in traditional financial markets.
• He said the event did not appear to originate from DeFi protocols.
• The selloff occurred amid unusually large trading volumes across both securities.
• Walton characterized the volatility as part of the maturation process for a new asset class.

The liquidity story: Strive argues the market’s ability to absorb large trading volumes is a positive signal.