Leveraged ETFs Skyrocket as MSTR Surges on Bitcoin Bets
The Bitcoin-linked stock MSTR has seen a nearly 29% surge over the past five trading days, while its leveraged ETFs have skyrocketed by around 60%. The T-Rex 2X Long MSTR Daily Target ETF (MSTU), GraniteShares 2x Long MSTR Daily ETF (MSTP), and Defiance Daily Target 2X Long MSTR ETF (MSTX) are designed to magnify MSTR's daily moves. On Wednesday, however, these funds experienced a sharp pullback after MSTR fell 3.07% to $162.20.
The leveraged ETFs' performance is particularly notable due to their compounding effect. Although they target about 2X MSTR's daily performance, their actual returns can vary significantly over time. For example, MSTU and MSTP use a leverage level of around 2X, but Wednesday's decline saw these funds experience roughly a 6% decline in value.
Strategy Inc.'s recent Bitcoin purchases have likely contributed to the surge in MSTR and its linked ETFs. The company purchased 950 BTC for $75.7 million between September 14th and 20th, bringing its total holdings to 846,000 BTC. This significant increase in Bitcoin holdings has made MSTR unusually sensitive to moves in the cryptocurrency.