MSTU and MSTX: these MicroStrategy ETFs are booming

Leveraged MicroStrategy ETFs Surge as Inflows and Stocks Hit New Highs

MicroStrategy ETFs have been firing on all cylinders recently, with notable surges in both inflows and stock performance.

The Defiance Daily Target 1.75x Long MSTR ETF (MSTX) and the T-Rex 2x Long MSTR Daily Target Fund (MSTU) have posted impressive gains of 28% and 31%, respectively, over the last five days. Both ETFs have also seen significant asset growth, adding over $207 million and $300 million in assets this year.

These ETFs have outpaced MicroStrategy’s stock, which has risen 16.1% during the same period.

Bitcoin Rebounds, Driving ETF and Stock Gains

The strong performance continued on October 14 as Bitcoin (BTC) and other cryptocurrencies experienced a significant rebound. MicroStrategy’s shares surged by over 5.3% in pre-market trading, while MSTX and MSTU ETFs climbed 9.50% and 10.6%, respectively.

Bitcoin, the largest cryptocurrency by market capitalization, reached $65,000 for the first time since September 30, marking a shift away from the previous fear-driven market sentiment, as reflected in the crypto fear and greed index.

Stimulus Measures Boost Market Sentiment

A key catalyst for this rally was the announcement from Chinese officials regarding new stimulus measures. Lan Fo’an, China’s Finance Minister, pledged continued support for the struggling property sector and hinted at further government spending to boost economic growth.

In response, Goldman Sachs raised its economic growth forecast for China, projecting a 4.9% growth rate, up from its previous estimate of 4.7%.

This positive shift in sentiment helped fuel an upward trend in financial markets globally, with stock indices in the U.S., Asia, and Europe all seeing gains.

MicroStrategy’s Bitcoin Holdings and Market Impact

MicroStrategy’s stock performance is often closely tied to Bitcoin’s price movements due to the company’s significant holdings. According to BitcoinTreasuries, MicroStrategy currently holds 252,220 BTC, worth approximately $16.3 billion.

MSTU and MSTX: High-Risk, High-Reward Leveraged ETFs for MicroStrategy Investors

Leveraged ETFs like MSTU and MSTX provide MicroStrategy investors with a high-risk, high-reward opportunity by using leverage to amplify gains.

For instance, MSTU is designed to rise 2x for every 1% increase in MicroStrategy’s stock on a given day, while MSTX is structured to rise 1.75x. As a result, these leveraged funds can deliver strong returns during periods when MicroStrategy shares are soaring.

These ETFs aim to replicate the success of other leveraged funds, such as the ProShares UltraPro QQQ, which tracks the Nasdaq 100 Index. Over the last decade, the Nasdaq 100 Index has risen 430%, while the TQQQ leveraged ETF (which uses 3x leverage) surged by an impressive 2,360% in the same period.

The Risks of Leveraged ETFs

However, the high potential for gains comes with substantial risk. If the underlying asset—MicroStrategy’s stock—underperforms, the losses can be steep. For example, in 2022, the TQQQ ETF dropped by 79% as the Nasdaq 100 Index declined by 32%. This highlights the inherent volatility and risk of leveraged ETFs, which are designed for more aggressive investors willing to take on heightened exposure to market fluctuations.