Leverage Liquidations Trigger Sharp Drop
On Thursday, the digital credit market was shaken by a sharp selloff that sent Strategy’s STRC preferred equity tumbling to $82.50, nearly 17% below its intended $100 par value.
Strive CEO Matt Cole attributed the chaos to leverage-driven liquidations, as traders who had borrowed against their positions were forced to sell en masse. The result was not only heavy price declines but also record trading activity: STRC saw $941 million in volume and SATA $153 million, ranking as their fourth- and second-largest trading days respectively. For investors accustomed to stability in these instruments, the magnitude of this move was jarring.
In May, combined exchange volumes dropped 3.45% to $4.41 trillion, marking the lowest monthly total since September 2024.
STRC’s collapse below $83 shattered assumptions about its resilience.
Dividend Cut Hints at Deeper Worries
On paper, STRC is designed as a high-yield safety play, offering an annualized 11.5% payout and aiming to hover near its $100 par value. But recent management decisions have fueled uncertainty. On May 14—just before its monthly ex-dividend date and with bitcoin trading above $80,000—STRC closed at par. Yet within days, Strategy proposed shifting its dividend payments from monthly to semi-monthly intervals. This move was framed as an effort to reduce price swings around ex-dividend dates, but some analysts argue it signals deeper concerns about liquidity and payout sustainability.
The contrast is stark: while Strive’s SATA began offering daily dividends at a 13% yield on May 14, Strategy’s changes left investors questioning whether STRC’s fundamentals remain intact or if something more structural is amiss.
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Cash Reserve Shrinks After Bond Buyback
Further pressure came from Strategy’s balance sheet maneuvers. On May 15, the company announced it would repurchase $1.5 billion of its 2029 convertible notes at an 8% discount—a move aimed at reducing debt but one that depleted cash reserves significantly. By May 26, Strategy confirmed that its cash fund had shrunk to just $871 million after financing the buyback. This matters because STRC investors rely on those reserves as a backstop for dividend payments and market confidence.
At the time of the buyback announcement, Strategy still carried over $8 billion in convertible debt while Strive had none—a micro-contrast that has not gone unnoticed by market participants wary of credit risk. The sheer scale of Strategy’s liabilities casts a long shadow over its preferred equity products.
STRC’s Par Promise Under Threat
Both STRC and SATA are built around a promise: stable prices anchored near $100 per share and consistent high yields for holders. Yet Thursday’s rout exposed underlying vulnerabilities in this model when market stress hits—especially when leverage unwinds quickly across digital credit markets. Even after rebounding from intraday lows, STRC closed at just $88.59 while SATA finished at $97, leaving both securities well below their targets.
According to decrypt.co, uncertainty about how Strategy will maintain regular dividend payments is now weighing heavily on sentiment toward STRC. While Strive’s Chief Risk Officer insists that fundamentals are sound following the flush-out of leveraged positions, it remains unclear whether investor confidence will return without further clarity on payout mechanisms and risk management.
What could shape the next move
If Strategy confirms a concrete timeline or mechanism for STRC dividend payments following its May 26 disclosure that cash reserves fell to $871 million after the $1.5 billion bond repurchase, immediate price stabilization could follow; however, whether such clarity will be provided remains unclear.
