Recent challenges in the leveraged ETF market raise concerns among investors. This article explores why the T-REX 2X Long MSTR ETF has faced a significant decline.
The Decline of Strategy's Leveraged ETF
The T-REX 2X Long MSTR Daily Target ETF, amplifying exposure to Strategy shares, has fallen by 81% since November 2024. Despite initial successes, such products are susceptible to significant risks due to daily rebalancing.
Risks of Leveraged Investing
A study by GSR Markets indicates that during periods of high volatility, leveraged ETFs underperform by over 20% compared to similar strategies. Products like the MSTU and MSTZ from REX Shares and Tuttle Capital were launched with high interest, but their long-term performance raises concerns.
Impact of Bitcoin Volatility
The significant drop can be largely attributed to the crypto market correction, particularly Bitcoin, a key asset for Strategy. Although MSTR initially saw a 2500% increase, by early 2025 the stock declined by 15% due to BTC correction in February. Changpeng Zhao's prediction about BTC's drop after the rally has become pertinent, highlighting market instability.
The fall of the T-REX 2X Long MSTR ETF illustrates the dangers of leveraged products, especially amidst volatile assets like Bitcoin.
