Bitcoin News Today: Leveraged ETFs' 80% collapse underscores volatility's compounding risk

Bitcoin-Spekulanten leiden: Hebel-ETFs auf Strategy-Aktie brechen um 80% ein

The collapse of leveraged exchange-traded funds (ETFs) tied to Strategy Inc. has left retail investors reeling as the company's stock, a proxy for Bitcoin exposure, plunged over 66% from its recent highs. The most popular products-MSTX and MSTU, which offer double the daily return-have lost more than 80% of their value in 2025, ranking among the worst-performing ETFs in the U.S. market according to market analysis. A third fund, MSTP, launched during the crypto boom in June, has similarly underperformed. Collectively, these funds have shredded $1.5 billion in assets since early October, with combined holdings falling from $2.3 billion to $830 million.

The turmoil follows a broader crypto market rout, with Bitcoin dropping over 30% from October highs to trade near $85,000. Strategy's stock, which holds 650,000 Bitcoin, has mirrored the crypto asset's volatility. CEO Phong Le has emphasized the company's flexibility to raise capital through equity and debt to sustain its Bitcoin accumulation strategy, but the recent market selloff has strained its balance sheet. To address concerns, Strategy announced a $1.44 billion USD reserve to cover 21 months of dividend and interest payments, a move intended to reassure investors and prevent forced Bitcoin sales.

The leveraged ETFs' performance highlights the risks of compounding in volatile markets. These funds aim to deliver twice the daily return of Strategy's stock, but sharp price swings exacerbate losses. Roxanna Islam, head of sector research at TMX VettaFi, noted that "leveraged single-stock ETFs can look great on the way up, but erase gains quickly when the underlying trade reverses." This dynamic has been particularly punishing for Strategy's ETFs, which have seen daily losses amplified by their 2x leverage.

The market's distress is compounded by the erosion of Strategy's valuation premium. The company's market net asset value (mNAV) ratio, which compares its enterprise value to Bitcoin holdings, has fallen to 1.17, raising fears that slipping below 1.0 could trigger forced sales of Bitcoin to meet obligations. Analysts at JPMorgan have warned that Strategy could be removed from major benchmarks like the MSCI USA and Nasdaq 100, potentially triggering billions in passive outflows.

Despite the setbacks, Strategy's leadership remains optimistic. Phong Le has emphasized the company's long-term Bitcoin strategy. Meanwhile, the broader crypto market shows signs of stabilization, with Bitcoin recently rebounded above $90,000 after a week of inflows into crypto ETFs. However, the path forward remains uncertain, as leveraged ETFs and speculative retail bets continue to face scrutiny in a rapidly evolving regulatory landscape.