Leveraged MicroStrategy ETFs Are Playing With Fire, Experts Warn
Investors have poured billions into two highly leveraged ETFs linked to MicroStrategy Inc. (NASDAQ:MSTR), a company synonymous with aggressive Bitcoin (CRYPTO: BTC) investments.
What Happened: The T-Rex 2X Long MSTR Daily Target ETF and the Defiance Daily Target 2X Long MSTR ETF collectively now manage around $5 billion in assets, reflecting the fervor surrounding Bitcoin’s recent rally, according to a report by The Wall Street Journal.
However, these funds, designed to amplify MicroStrategy’s daily stock returns by 2x, have exposed investors to significant risks and underperformance.
MicroStrategy, which holds approximately $35 billion in Bitcoin, has seen its market capitalization surge to nearly $90 billion—more than double the value of its cryptocurrency holdings.
Analysts attribute this to bullish sentiment among investors and speculate that the leveraged ETFs are contributing to the stock’s meteoric rise.
But skeptics warn that this level of exuberance is unsustainable.
Both ETFs are inherently risky due to their complex derivatives strategies and MicroStrategy’s Bitcoin exposure.
The funds aim to double the daily return of MicroStrategy stock, but their performance has fallen short recently.
For instance, …
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