On June 18, Bitcoin's corporate credit market faced its first significant stress test—a selloff that saw margin calls trigger a cascade of liquidations.

Despite the chaos, the sector proved resilient. According to a report from BitcoinTreasuries.net, dividend payments continued uninterrupted, and secondary-market volumes reached record levels. Corporate treasuries kept adding Bitcoin to their reserves, reinforcing their commitment. The resilience of the market amidst such turbulence drew praise from industry proponents and sustained interest from prospective issuers. They are advancing plans for new yield-paying products across various regions including the US, Europe, and Asia.

The selloff underscored the dangers of leverage. Preferred shares like Strategy's STRC and Strive's SATA, previously seen as stable, buckled under pressure. Their prices plummeted, with STRC falling to about $75, a stark 25% drop from its stated value. Yet, investors continued to flock to the market, believing in its long-term potential. The rapid decline forced Strategy to respond. The company increased the STRC's payout to 12% and introduced a broader capital framework. This included a $2.55 billion cash reserve and the authority to repurchase shares, aiming to stabilize the market.

Strategy and Strive's use of preferred shares highlighted a novel approach to raising capital without relying solely on conventional debt or common-stock sales. The securities offered fixed or variable dividends with no maturity date, enticing investors with yields above traditional fixed-income products. But the allure faded as prices dropped, exposing leverage's volatility.

For months, both STRC and SATA traded within relatively narrow ranges around par. That stability encouraged some investors to borrow money to increase their positions and amplify dividend income, according to BitcoinTreasuries.net's June corporate adoption report. The strategy worked as long as the shares remained stable and the dividends exceeded the cost of financing the trade.

The calculation began to break down as Bitcoin fell below $60,000 in June, and selling pressure spread across companies and securities tied to the cryptocurrency. Beginning June 18, STRC and SATA moved sharply below par. Falling prices triggered margin calls for leveraged STRC holders, forcing them to sell into an already weakening market and driving further liquidations. SATA also declined under pressure from its own market conditions and spillover from STRC’s selloff.

Despite the June sell-off, the market stabilized faster than initial liquidations suggested, with prices rebounding, trading volumes hitting record highs, and corporate treasuries continuing to buy Bitcoin. As of publication, STRC had recovered to about $87 from a low near $75, while SATA had climbed back to roughly $97. The uneven rebound suggested investors were distinguishing between the two securities rather than abandoning the broader market.

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Trading activity also accelerated during the turmoil. Combined June volume for STRC and SATA exceeded $10 billion, even as both products traded below their $100 stated values. STRC accounted for $8.7 billion of that total, its highest monthly volume on record, and posted two of its five busiest trading weeks. SATA generated nearly $1.5 billion, almost twice its May volume, with three of its four strongest weeks occurring during the month.

The heavy secondary-market activity did not translate into fresh capital for the issuers. Neither STRC nor SATA was able to raise funds through at-the-market sales in June, as most transactions involved existing shares changing hands between investors. However, the continued buying of Bitcoin by Strategy and Strive, who acquired 3,625 and 3,364 Bitcoin respectively, was perceived as evidence that the selloff was more about leverage issues than fading confidence in Bitcoin as a corporate asset.

Looking to the future, new players like Metaplanet are eyeing Bitcoin-backed credit beyond the US. On July 10, Metaplanet announced a study in Japan, exploring tokenized credit instruments using Bitcoin as backing. The Tokyo-listed company will work with Siiibo Securities, the yen stablecoin issuer JPYC, and the regulated security-token platform Progmat to examine products that use Bitcoin as a backing asset or as a source of credit support. Metaplanet recently acquired Siiibo for $13 million.

Digital credit backed by Bitcoin could evolve into instruments traded and settled globally on a 24/7/365 basis, with interest and distributions accruing on a daily prorated basis according to the holding period. This initiative targets longstanding barriers in Japan’s corporate credit market, where smaller and growing companies can face high costs for product design, distribution, investor administration, interest payments, and redemptions. Metaplanet and its partners said digital infrastructure could reduce some of those costs.

Metaplanet's planned entry adds weight to expectations that Bitcoin-backed credit will expand, though June’s selloff has given investors a clearer view of the risks behind those forecasts. A BitcoinTreasuries.net survey found that 78% of respondents expect the digital credit market to grow through the end of 2027. Another 22% projected that outstanding supply could exceed $50 billion, with some expecting it to surpass $100 billion.

The results, however, reflect a group already predisposed to support the products. The report found that 87% of respondents viewed digital credit favorably and 72% had invested in the sector. About 76% also expected similarly sharp price declines to occur again. That mix of confidence and caution offers a more measured assessment of June. Investors remain optimistic about the market’s long-term potential, even as they acknowledge that leverage and liquidity can drive large departures from par.

Michael Saylor has argued that Bitcoin makes digital credit easier to assess because its primary market risk is tied to a globally traded and continuously observable asset. Investors can track Bitcoin’s price and volatility in real time and incorporate those movements into their valuation models. June proved Bitcoin-backed credit could survive a liquidation shock. Its next hurdle is persuading investors to fund new issuance after watching leading products trade below par.