It appears that our dear friend, the exchange-traded fund (ETF) designed to offer a rather ambitious leveraged long exposure to the shares of Strategy—formerly known as MicroStrategy—has taken a rather unfortunate tumble, plummeting approximately 81% since it reached its dizzying heights on the 20th of November, as reported by the ever-reliable The Kobeissi Letter. Oh, the humanity! 😱

In a rather dramatic turn of events, the T-REX 2X Long MSTR Daily Target ETF (MSTU) has lost a staggering 40% of its value in just the last three trading sessions. One can only imagine the expressions on the faces of investors as they read this news in a Feb. 26 X post. 😬

Meanwhile, shares of MSTR, the stock of Strategy, have also decided to join the party of despair, dropping roughly 20% over the same period, according to the ever-astute data from Google Finance. It seems that leverage ETFs are experiencing what one might call a “massive downswings,” as noted by The Kobeissi Letter. Who knew finance could be so dramatic? 🎭

Now, let’s not forget that leveraged ETFs add a delightful sprinkle of additional risk to MSTR and tend to underperform due to the costs associated with daily rebalances to maintain their lofty leverage targets. They also prefer to hold financial derivatives rather than the underlying stock, which is a bit like trying to catch a fish with a butterfly net. 🦋

In a rather enlightening study by GSR Markets, it was found that in volatile market conditions—when daily rebalances are at their most extravagant—leveraged ETFs lag behind their more stable counterparts by a whopping 20%. Talk about a rough ride! 🎢

Related: Stop piling into leveraged Bitcoin ETFs and consider this instead

Strong uptake

In a rather bold move back in September, asset managers REX Shares and Tuttle Capital Managed decided to launch two ETFs designed to provide leveraged exposure to MSTR share performance. One can only hope they packed a parachute! 🪂

The ETFs—MSTU and T-REX 2X Inverse MSTR Daily Target ETF (MSTZ)—aim for two-times leveraged long and short exposure to MSTR, respectively, as REX and Tuttle proudly proclaimed. It’s a bit like trying to ride a unicycle on a tightrope, if you ask me! 🎪

They made their grand entrance shortly after another asset manager, Defiance, managed to clock a staggering $22 million in volume on the very first day of launching a similar ETF. That “may be a Day One record for a leveraged ETF,” as Eric Balchunas, a Bloomberg Intelligence ETF analyst, noted in an Aug. 15 X post. Quite the spectacle! 🎉

Originally a business intelligence firm, Strategy has transformed into a de-facto cryptocurrency hedge fund in 2020, when the illustrious founder Michael Saylor decided to use the company’s balance sheet to buy Bitcoin (BTC). A bold strategy, Cotton! Let’s see if it pays off! 💰

Strategy has spent a staggering $33 billion buying BTC at an average cost of around $66,000 per coin, earning an unrealized profit of more than $10 billion, according to the ever-reliable data from MSTR Tracker. Quite the financial wizardry, wouldn’t you say? 🧙‍♂️

At the peak of MSTR’s performance in November, the stock had clocked an astonishing 2500% returns. However, as of Feb. 26, MSTR shares are down around 15% year-to-date, largely due to Bitcoin’s rather dramatic price correction in February. Oh, the fickle nature of fortune! 🍀

2025-02-26 23:10

Shocking Plunge: MicroStrategy ETF Takes a Nosedive! 🚀💔

Related: Stop piling into leveraged Bitcoin ETFs and consider this instead

Strong uptake

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