MicroStrategy Short Sellers Throw in the Towel as Bitcoin Soars
It looks like traders betting against MicroStrategy (MSTR) are calling it quits. The stock—closely tied to bitcoin’s price—has been on a tear lately, and those wagering it would fall seem to be cutting their losses.
On Monday, the Defiance Daily 2x Short MSTR ETF (SMST) dropped another 7.6% to $18.17, hitting its lowest level ever. Trading volume spiked to nearly 2.9 million shares, the second-highest on record. When an ETF like this tanks on heavy volume, it usually means one thing: bears are giving up.
Bitcoin’s Rally Leaves Bears No Room to Breathe
The timing isn’t surprising. Bitcoin itself surged past $122,000 earlier in the day, setting a fresh all-time high. MicroStrategy, which holds over 600,000 BTC, saw its shares climb 3% to $456—a level not seen since last November.
SMST is designed to deliver twice the *inverse* of MSTR’s daily performance. So if MSTR rises 5%, SMST should drop roughly 10%. But over the long haul, leveraged ETFs like this tend to bleed value, especially in a strong uptrend. And that’s exactly what’s happened. Since its launch last August, SMST has crumbled from over $2,000 to barely $18.
Oddly enough, the fund still saw $8.2 million in net inflows over the past six months, according to VettaFi. Maybe some traders thought MicroStrategy’s rally couldn’t last. If so, they were wrong.
The Long Side of the Trade Is Winning
Meanwhile, the opposite ETF—Defiance’s 2x Long MSTR (MSTX)—jumped to nearly $50 on Monday, its highest point since late January. Volume here has climbed for four straight days, hitting 9.2 million shares.
But even this fund has its quirks. Despite MSTR’s massive gains, MSTX has actually seen $175 million in outflows over the past six months. It’s a reminder that leveraged products are risky, even when the trend is your friend.
MicroStrategy’s stock has skyrocketed from around $100 to over $440 in the same period. The company’s massive bitcoin holdings, now worth more than $70 billion, have turned it into a de facto crypto proxy. For now, at least, the bulls are firmly in control.
And the bears? They’re probably licking their wounds—or switching sides.
