A bearish leveraged ETF tied to MicroStrategy (MSTR) has attracted a wave of investor capital despite trading at record lows, suggesting rising caution among traders as Bitcoin’s rally pushes into overextended territory.
The Defiance Daily Target 2x Short MSTR ETF (SMST), which offers -2x daily exposure to MicroStrategy stock, has drawn over $24 million in net inflows since July 11, according to VettaFi. The largest single-day inflow—$10 million—came on July 16, the highest since late March.
The surge in demand came as SMST slumped to a new low of $17.68, while MicroStrategy shares surged to an eight-month high of $456, boosted by Bitcoin’s climb above $120,000. The fund rebounded 12% on Friday, testing a long-term descending resistance trendline, and hovered near $20 in Monday trading.
Bullish ETF Sees Sharp Capital Flight
Meanwhile, its bullish counterpart—the Defiance Daily Target 2x Long MSTR ETF (MSTX)—has experienced a stark reversal. The fund, which offers 2x daily exposure to MSTR’s gains, saw over $118 million in net outflows since July 11.
MSTX dropped 12% on Friday to $42.30 and remained flat on Monday.
The contrasting flows suggest a shift in sentiment, with investors possibly repositioning after MicroStrategy’s recent rally. The fund’s performance is closely tied to Bitcoin’s moves, as the company holds billions in BTC on its balance sheet.
Traders Reassess Risk as Crypto Rally Matures
The inflows into SMST and the simultaneous outflows from MSTX point to growing hedging activity or speculative downside positioning, particularly as Bitcoin trades near historic highs.
While MicroStrategy has benefited from the broader crypto uptrend, the scale of ETF flows implies that leveraged traders may be preparing for increased volatility—or a pause in upside momentum.
As MicroStrategy remains a proxy for institutional Bitcoin exposure, shifts in ETF demand offer a window into broader market expectations around crypto performance and macro risk sentiment.
