Leveraged Bearish Strategy ETF Surges 19%, Signals Dour Outlook for MSTR and Bitcoin
The Defiance Daily Target 2x Short MSTR ETF (SMST), a leveraged ETF inversely tracking MicroStrategy (MSTR) stock, experienced a significant surge last week, rising 19%—its best weekly performance since late February. This marks the third consecutive week of gains, a trend unseen since the ETF’s launch in August 2023. This rally is noteworthy because it decisively broke through a bearish trendline established since September 2024’s highs, indicating a potential shift in market sentiment.
The chart reveals a bullish marubozu candle, a strong technical indicator suggesting buyer dominance and upward momentum. This candle, characterized by a large green body and minimal wicks, reinforces the significance of the trendline breakout. The use of a log-scale chart, appropriate for assets with exponential price movements like SMST, further emphasizes the magnitude of this price action.
The implications of SMST’s performance are significant for both MicroStrategy and Bitcoin (BTC). MicroStrategy holds a substantial amount of Bitcoin—over 628,790 BTC, worth more than $71 billion at the time of writing—making it the largest publicly listed Bitcoin holder. Therefore, a bearish bet on MSTR, as represented by the 2x short ETF, suggests a negative outlook for Bitcoin.
The SMST ETF’s recent success is further highlighted by contrasting it with its bullish counterpart, the 2x long MSTR fund. While SMST saw a net inflow of $16.3 million in the last six months, indicating increased bearish sentiment, the long MSTR fund experienced net outflows exceeding $275 million. This divergence underscores the growing bearish sentiment surrounding MicroStrategy and, consequently, Bitcoin. The analyst concludes that this technical analysis suggests a negative outlook for both MicroStrategy and Bitcoin. The considerable rise in the inversely correlated ETF suggests a bearish prediction for the future performance of both assets.
