The crypto market's downturn has dealt a devastating blow to leveraged exchange-traded funds (ETFs) tied to Strategy (MSTR.O), the corporate giant known for its massive Bitcoin holdings. But here's where it gets controversial: could this be the beginning of the end for companies betting big on volatile cryptocurrencies?
Imagine this: a 3D-printed 'ETF' looming over a plummeting stock graph, a stark visual representation of the turmoil. This year, Strategy's leveraged ETFs have become some of the hardest-hit victims of the crypto slump. Funds like the T-Rex 2X Long MSTR Daily Target ETF and Defiance Daily Target 2x Long MSTR ETF, designed to amplify Strategy's share returns, have hemorrhaged nearly 85% of their value in 2025. Even the T-Rex 2X Inverse MSTR Daily Target ETF, which profits when Strategy shares fall, has shed 48% during the same period.
And this is the part most people miss: Strategy's own shares have plummeted over 40% this year, with the latest drop triggered by Bitcoin's fall below $90,000. This is a stark contrast to October's record high of $126,223.18, a peak now overshadowed by global risk aversion.
Michael Saylor's Strategy, a pioneer in the 'buy-and-hold' crypto treasury strategy, has inspired countless imitators. However, these copycats are also feeling the heat, with their shares lagging significantly. The focus now is on Strategy's 'mNAV' metric, a ratio of its enterprise value to its Bitcoin holdings. CEO Phong Le's recent comments about potentially selling Bitcoin if this ratio dips below 1 have sent ripples through the market. Reuters calculations place the ratio at a precarious 1.1, leaving investors on edge.
Mike O'Rourke of JonesTrading points out that Le's remarks contradict Strategy's core message of holding Bitcoin through market volatility. This shift in stance raises questions about the company's long-term strategy and its ability to weather the crypto storm.
The impact is tangible. Strategy drastically revised its full-year outlook, projecting a potential loss of up to $5.5 billion, a stark contrast to its earlier $24 billion profit forecast. This revision, based on the assumption of Bitcoin reaching $150,000 by year-end, highlights the company's vulnerability to price fluctuations. Vincenzo Vedda of DWS aptly summarizes the situation: 'Great strategy when prices rise, but limited options when they fall.'
Adding to the pressure, Strategy has set aside $1.44 billion for dividends and debt interest, while short sellers have profited handsomely, raking in over $2.5 billion this year. Since joining the Nasdaq 100 index, Strategy shares have more than halved, plummeting 70% from their November 2024 peak.
Interestingly, analysts remain surprisingly optimistic. Out of 16 brokerages covering Strategy, 10 recommend 'buy,' four 'strong buy,' and two 'hold,' with a median price target implying a 183% surge in the next year. This disconnect between market performance and analyst sentiment begs the question: are they seeing something the rest of us are missing?
As Michael Saylor prepares to deliver his keynote, 'The Undeniable Case for Bitcoin,' at the Binance conference in Dubai, the future of Strategy and its leveraged ETFs hangs in the balance. Will Saylor's unwavering belief in Bitcoin be enough to turn the tide, or is this the beginning of a new era of caution for crypto-focused companies? What do you think? Is Strategy's strategy still viable, or is it time for a new approach?
