MicroStrategy Bear ETF Crashes
MicroStrategy Bear ETF Crashes on Record Volume
The Defiance Daily Target 2x Short MSTR ETF (SMST) plummeted to an all-time low on Monday, experiencing its fourth consecutive day of record lows. This dramatic fall coincided with near-record trading volume, suggesting a significant shift in market sentiment. 2.88 million shares changed hands, the second-highest trading volume ever recorded for the ETF.
Bears Capitulate Amid Bitcoin's Rise
This high-volume collapse strongly indicates capitulation among bears—those betting against MicroStrategy are exiting their positions. A record low coupled with high volume often signals peak bearishness and potentially marks a market bottom. This event comes as Bitcoin surged to record highs above $122,000 during Monday's Asian trading hours, influencing the crypto market positively.
MicroStrategy's stock (MSTR) also saw a significant increase, rising over 3% to $456—its highest price since November. This upward movement further supports the narrative of a bearish capitulation in the SMST ETF.
Understanding the Leveraged Bearish Bet
The SMST ETF aims to provide daily returns that are -200% of MSTR's daily percentage change. This is a leveraged bearish bet, designed to profit from declines in MicroStrategy's stock price. The ETF's price has dramatically fallen from over $2,000 at its inception in August of last year.
Despite the downtrend, the fund saw a net inflow of $8.2 million in six months (data from VettaFi).
MSTR's Growth and Bitcoin Holdings
Meanwhile, MSTR's share price has risen significantly from $100 to over $440 during the same period. MicroStrategy remains the world's largest publicly-listed Bitcoin holder, possessing approximately 601,550 BTC (worth approximately $70.56 million at the time of writing).
The 2x Long MSTR ETF
In contrast to SMST's collapse, the Defiance Daily Target 2x Long MSTR ETF (MSTX) rose to nearly $50 on Monday—its highest point since January 24th. Trading volume for MSTX also increased for the fourth straight day, reaching 9.2 million shares. However, MSTX experienced a net outflow of over $175 million in the past six months (VettaFi).
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