Bitcoin Slump Claims New Victims: Leveraged ETFs Tied To Strategy Suffer Major Losses

Overview

Bitcoin has faced significant volatility recently, with a notable price drop impacting various entities in the cryptocurrency market. This downturn has particularly affected Strategy, a public company with substantial Bitcoin reserves, leading to considerable losses in its leveraged exchange-traded funds (ETFs).

Bitcoin’s Price Volatility

Bitcoin experienced a sharp decline, dropping to a low of $84,000 before making a partial recovery of 9% on Tuesday. This volatility has raised concerns about the financial health of Strategy, which holds over 650,000 bitcoins, making it the company with the largest BTC reserves. The recent market conditions have prompted Strategy’s CEO, Phong Le, to suggest the possibility of selling some Bitcoin holdings.

Impact on Strategy’s Leveraged ETFs

The downturn has severely impacted Strategy’s leveraged ETFs, which are designed to amplify returns on the firm’s stock. Reports indicate that two specific ETFs, the T-Rex 2X Long MSTR Daily Target ETF and the Defiance Daily Target 2x Long MSTR ETF, have lost nearly 85% of their value this year. Additionally, the T-Rex 2X Inverse MSTR Daily Target ETF has seen a decline of 48%. This has contributed to a more than 40% drop in the shares of Strategy, also known as MSTR, primarily driven by Bitcoin’s price crash.

Concerns Over Market Net Asset Value

Investor focus has shifted to Strategy’s market net asset value (mNAV), which compares the company’s enterprise value to its Bitcoin holdings. Following Le’s comments about potentially selling cryptocurrencies if the mNAV drops below 1, concerns regarding the firm’s long-term outlook have intensified. Current estimates place this ratio at approximately 1.1.

Adjustments to Financial Outlook

In light of the shifting market conditions, Strategy has revised its full-year outlook, warning of a potential profit ranging from $6.3 billion to a loss of $5.5 billion. This marks a significant change from an earlier forecast of $24 billion in net profit, which was based on an anticipated Bitcoin price of $150,000 by year-end.

Analyst Sentiment

Despite the challenges, some analysts remain optimistic about Strategy’s prospects. Of the 16 brokerages monitoring the company, 10 recommend it as a “buy,” while four suggest a “strong buy.” The overall median price target indicates a potential increase of 183% over the next year.

Impact on the Crypto Market

• Significant losses in leveraged ETFs tied to Bitcoin have raised concerns about the financial stability of major cryptocurrency holders.
• The potential sale of Bitcoin holdings by Strategy could influence market sentiment and price movements.
• The downward revision of Strategy’s profit outlook highlights the impact of Bitcoin’s volatility on corporate strategies.
• Analyst recommendations suggest a divided sentiment in the market, with some still seeing potential in Strategy despite recent losses.
• The focus on mNAV indicates growing investor scrutiny on how well companies are managing their cryptocurrency assets in challenging market conditions.

Updated: 12/3/2025, 6:37:14 AM