coindesk.com 
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.
- STRC traded roughly $950 million in volume on Thursday, according to Walton.
- SATA traded approximately $150 million in volume the same day.
- Walton contrasted those figures with BlackRock's preferred securities ETF, PFF, which he said traded about $77 million in volume.
- He argued deep liquidity is critical for attracting institutional investors and supporting long-term adoption.
Reading between the lines: Strive sees digital credit as a much larger opportunity than current market participants appreciate.
- Walton said investors appeared to rotate between SATA and STRC as yields converged.
- He argued the products are easier to price and trade because markets can continuously assess risk and value.
- Strive believes digital credit could ultimately address a credit market worth roughly $300 trillion.
- Walton described the products as offering one of the most attractive risk-return profiles available in credit markets.
What comes next: Executives contend the recent volatility does not undermine the products' long-term thesis.
- Walton emphasized that SATA and STRC are credit instruments, not stablecoins.
- He said Strategy's balance sheet remains significantly healthier than during the 2022 bitcoin bear market.
- According to Walton, Strategy currently carries roughly 10% leverage compared with approximately 130% leverage during the prior cycle.
- He expects market participants to better understand the products over time and believes prices will gravitate back toward their $100 target levels.
