MicroStrategy's 2x Short ETF Falls 7.58% as Bitcoin Surges

The Defiance daily target 2x short MSTR ETF, which provides a leveraged bearish exposure to shares of bitcoin holder MicroStrategy, fell to a record low for the fourth consecutive day. On Monday, the ETF's price slipped 7.58% to $18.17, marking a significant decline. This drop occurred as 2.88 million shares changed hands, indicating a high level of trading activity.

The decline in the ETF's price is attributed to the surge in Bitcoin's price, which reached record highs above $122,000 during Monday's trading hours. This price surge led to a rise in MicroStrategy shares, which increased over 3% to $456, the highest since November. The high-volume collapse of the ETF points to capitulation of bears, suggesting that those betting against MSTR have likely given up and are exiting the market.

A high-volume record low typically indicates capitulation, where market participants surrender to the relentless bearish trend and exit all their positions, giving up all hope of a recovery. This type of price action often marks peak bearishness in the market or bottoms. The 2x short ETF seeks to deliver daily investment results that are -200%, or minus 2x, the daily percentage change in the MSTR share price. In other words, it's a leveraged bearish bet.

The ETF's price has collapsed from over $2,000 on the inception day in August last year, and has been primarily in a downtrend, barring the brief uptrend from $1,600 to $2,368 in late August last year. As of Friday, the fund had a net inflow of $8.2 million in six months. MSTR's share price has increased multi-fold from $100 to over $440 during the same time. MicroStrategy is the largest publicly-listed bitcoin holder in the world, boasting a coin stash of 601,550 BTC.

On the other hand, the Defiance daily target 2x long MSTR ETF rose to nearly $50 on Monday, the highest since January 24, with trading volumes rising for the fourth straight day to tally 9.2 million. As of Friday, MSTX had a net six-month outflow of over $175 million. The rise in the 2x long MSTR ETF indicates that investors are bullish on MicroStrategy's prospects, despite the recent decline in the 2x short MSTR ETF.