Bitcoin preferreds slide below par as $10B margin calls hit

Bitcoin-linked preferred shares fell below par this week, with Strategy’s STRC dropping to $82.50 and Strive’s SATA sliding into the low $90s before recovering. The market for these digital-credit products has grown to about $10 billion in under a year.

STRC and SATA are perpetual preferred shares issued by companies that hold large Bitcoin treasuries. They pay recurring dividends of roughly 11% to 13% and were marketed to trade near a $100 par value, allowing investors to earn income tied to an issuer’s bitcoin holdings without owning the coins directly.

Some investors boosted returns by borrowing against the shares. That approach requires the securities to remain close to par. When STRC began to fall, leveraged accounts lost their cushion and faced margin calls. Brokers closed positions that breached maintenance requirements, prompting forced sales that pushed prices lower.

Parker White, co-founder of DeFi Development Corp., wrote on social media that STRC’s slide toward $82 pointed to forced liquidations. He noted heavy midday volume during the decline appeared consistent with broker-driven account closures rather than normal repositioning, and he said short sellers likely amplified downward pressure.

SATA experienced similar selling as investors under margin pressure sold available holdings. Overlap among holders in the young market pulled related securities into the same downward move. The declines occurred without missed dividends or changes to issuer Bitcoin reserves.

Strive’s chief executive, Matt Cole, rejected the view that the price action reflected a weakening credit profile. He said dividend reserves remained intact and the company is positioned to meet obligations. Cole wrote, “When markets move against leveraged holders, forced selling can create a cascade. The selling becomes disconnected from fundamentals and becomes driven by balance-sheet constraints.”

Supporters of Strategy argued the company’s balance sheet did not change because STRC traded lower. Jesse Myers, head of Bitcoin strategy at The Smarter Web Company, said current reserves could support dividend payments for decades and that the lower share prices raise effective yields for new buyers. Both STRC and SATA recovered some ground after the steepest selling.

Brokers are likely to review margin rules after the event. Issuers may face pressure to add protections such as larger cash reserves, clearer buyback plans, higher call premiums or more flexible dividend terms. Those measures would increase issuer costs and could reduce funds available for buying Bitcoin.

Cole added the episode offered a learning moment for the sector and wrote, “Digital Credit is still in its infancy.”