Par for the Course: Preferreds Plunge, Then Par-bounce, as Leverage Gets the Boot 🪃

The "digital credit" market absorbed its worst single-day selloff to date on Thursday, June 18, 2026, as preferred equity instruments issued by Bitcoin treasury firms Strategy and Strive Asset Management briefly broke sharply below their $100 par values before staging a rebound that executives attributed to forced deleveraging rather than deteriorating credit. Strive CEO Matt Cole described the session as "the most difficult day in the history of Digital Credit" in a post on X, with Strategy's STRC falling as low as $82.50 and closing at $88.59, while Strive's SATA dropped to $92.88 before recovering to $97. Both products are designed to trade near par and offer yields in the double digits.

Cole attributed the move to leveraged liquidations rather than issuer-level stress. "What happened today was a leverage liquidation event, not a deterioration in underlying credit quality," he wrote, adding, "There is an old saying in income markets that the road to hell is paved with carry." He said investors who were drawn to the relatively high yields increasingly used borrowed capital to enhance returns, and that once prices slipped, margin calls produced forced selling that drove the declines further. "Many eventually decide that owning it is not enough. They borrow against it. They lever it. That works until it doesn't," Cole wrote, comparing the episode to past hedge fund unwindings tied to leveraged U.S. Treasury positions.

Trading volumes on the day reinforced the deleveraging thesis, according to figures shared by Strive's Chief Risk Officer Jeff Walton. STRC saw roughly $941 million in trading, its fourth-largest session on record, while SATA saw $153 million, its second-largest. Walton noted that the volumes were disproportionately large relative to comparable instruments, such as JPMorgan's JPM.PD and BlackRock's PFF, suggesting that a leverage unwind was more likely than a credit-driven repricing. "Leverage appears to have been flushed, fundamentals intact, and the instruments absorbed the flow and found bids throughout the day," he posted on X. When asked on X for more information on where SATA leverage had been concentrated, Walton said Strive is "aware of a couple anecdotal sources" and is working on a "deeper postmortem analysis" that it plans to share.

Both instruments recovered from their intraday lows, with Cole pointing to the rebound as evidence of continued demand. "Both STRC and SATA experienced significant buying interest off their intraday lows," he said, and added, "A liquidation event and a credit event are not the same thing." He also stated, "Our dividend reserves remain intact. Our company is not under stress." Analysts told Decrypt on Thursday that it appears uncertainty around how Strategy intends to pay its dividends is causing "continued weakness" in STRC, noting it is typical for STRC to trade below par after its dividend date. The digital credit products are designed to help Strive and Strategy add funds for Bitcoin accumulation and have attracted investors seeking dividends with less volatility than exposure to $BTC or to the firms' common equities. As of the latest data cited in the coverage, Bitcoin was $62,361.86, up 2.58%.