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I've talked about the short thesis here, but there's a reason someone would go bigly short.

To bigly liquidate.

Today seemed like a very clear liquidation event. Particularly right at 11:45 am, at the bottom, but also throughout.

This comes down to how TradFi leverage works, which btw, can be FAR more degen than the craziest DeFi leverage.

The thing with TradFi leverage is that the leverage ratios (initial and maintenance margin) are all basically the same. Nearly all brokers use similar rules, so when TradFi degens go max leverage, they basically all have the same leverage ratio. This actually doesn't happen in crypto, because max leverage is so batshit crazy that few people do it, so you have a greater dispersion of leverage ratios.

This normally isn't a problem, because most securities trade up and down a bunch, so while the leverage ratios might be the same, liquidation levels are not. However, with $STRC, most folks doing max leverage were doing so at $100, meaning they all have/had similar leverage ratios AND liquidation levels/prices.

On a 50% initial margin position opened at $100, $82 = ~40% margin. Many brokers use risk weighted maintenance margin models to set thresholds above the FINRA maximum 25% maintenance margin. These can be based on security, position size, or credit worthiness of the buyer.

Given that $82 is right at the 40% level, it would be very reasonable to believe that the 40% level was the trigger for one or multiple major brokers to liquidate STRC positions. This would explain the dump going into mid-day today, as a few traders voluntarily closed before hitting the maintenance margin and being forcibly closed.

Things then really accelerated as the price approached $82, triggering a bunch of forced liquidations and creating the highest mid-day volume EVER on $STRC, excluding the day when Strive and Apyx each bought about $50M of STRC in a single day. See screenshot. This abnormally high mid-day volume is the smoking gun for forced liquidations, because in TradFi, the opens and the closes are when most of the volume happens, not during mid-day.

This volume spike is exactly what the big short(s) needed to cover and book an 18% profit on their "depeg trade".

The forced liquidations would also partly explain why $SATA finally dumped today. Many TradFi loopers likely also old some SATA, so when they got a margin call (or were approaching one), they sold everything in the account, including the SATA.

It's pretty clear that a big short was to blame here, but none of it would be possible without the TradFi levered loopers providing their exit liquidity. Given the very heavy retail nature of STRC/SATA, and the completely decimated confidence in crypto across the board, the big short was able to also source exit liquidity from all the CT dummies that read the bad takes on how "Strategy is the next FTX" and decided to dump.

As far as the DeFi levered loopers are concerned, the liquidations were a tiny tiny tiny drop in the bucket relative to the TradFi levered loopers. Low single digit millions for the entire week. So, while ppl are out blaming the DeFi Degens for using crazy leverage, it's the TradFi Terry's that are actually to blame with their looping.

So, going forward, what happens?

For one, I firmly believe STRC gets back to par, maybe very quickly. Additionally, Strategy needs to make some tweaks to the STRC design to become more anti-fragile, e.g. daily dividends, higher company call option, larger cash buffer maybe, and possibility of buybacks (just saying it's possible goes a long way). Lastly, hopefully TradFi investors learn their lesson to not levered loop these prefs so aggressively. Likely many of the brokers will also increase the maintenance margin requirements.

Whenever looking for a bottom, you typically look for a strong reversal on high volume. That's what we got today. That does not mean we rocket back to $100 next week, but I do think it means STRC gets back into the mid 90s next week. It could certainly drop again if $BTC nukes or if Saylor and team don't implement some tweaks, but I think this was at least a local bottom.

So, rather than staring at the chart and CT timeline, wondering if STRC/SATA and Strategy/Strive are completely dead, go touch grass and enjoy clipping your 11.5-13% dividend (or higher if you hold $apyUSD) ).

Have a great weekend ✌️. Goooo Team 🇺🇸🇺🇸🇺🇸🇺🇸🇺🇸