Strategy's Leveraged ETF Collapses After Bitcoin Correction

The T-REX 2X Long MSTR Daily Target ETF, linked to Strategy (formerly MicroStrategy), has fallen by 81% since its peak in November 2024, losing 40% in three days, according to recent data. This drop, amplified by Bitcoin’s volatility, highlights the risks of leveraged ETFs.

The Leveraged ETF from Strategy Falls by 81%

The T-REX 2X Long MSTR Daily Target ETF (MSTU), which amplifies exposure to shares of Strategy, plunged 81% since its peak on November 20, 2024, according to The Kobeissi Letter. In the last three trading sessions, it lost 40% of its value, while MSTR stock fell by 20%. These ETFs, popular for their promises of high returns, prove to be risky: their daily rebalancing, essential to maintain a 2x leverage, generates costs that erode their performance.

A study by GSR Markets shows that during periods of high volatility, these leveraged ETFs underperform by more than 20% compared to similar strategies. Launched in September by REX Shares and Tuttle Capital, the MSTU and its inverse MSTZ followed the success of Defiance, whose similar ETF reached $22 million in volume on its first day, a record according to Eric Balchunas.

Bitcoin: A Toxic Correction for the Leveraged ETF Market

This significant drop can largely be explained by the correction in the crypto market, particularly Bitcoin, a key asset for Strategy. While MSTR stock saw an impressive increase of 2500% at its November peak, it now shows a decline of about 15% since the beginning of 2025, largely due to the BTC correction in February.

Indeed, as Bitcoin reached $85,760 on February 26, a prediction by Changpeng Zhao, former CEO of Binance, resurfaces. Four years ago, he predicted a major correction of BTC after a surge to $101,000. This drop of nearly 16% coincides with the decline of the Strategy MSTU ETF (-81%), illustrating the persistent volatility of the crypto market.

The spectacular drop of the MSTU ETF thus underscores the dangers of leveraged products, especially on volatile assets like Bitcoin. While Strategy strengthens its treasury with a purchase of 20,356 BTC, the ETFs amplify losses during this correction period. Investors must remain cautious in the face of these high-risk instruments.