Investors are increasingly positioning against MicroStrategy as the company’s Bitcoin-fueled rally stretches into overbought territory. A leveraged ETF offering short exposure to the stock has drawn strong inflows—despite trading at all-time lows—while its bullish counterpart faces significant redemptions.
The Defiance Daily Target 2x Short MSTR ETF (Nasdaq: SMST), which provides -2x daily exposure to MicroStrategy shares, has pulled in more than $24 million in net inflows since July 11, according to VettaFi. Of that, $10 million arrived on July 16—marking its largest single-day inflow since March 26.
The influx of capital comes as SMST hit a record low of $17.68 last week. That decline was driven by MicroStrategy’s latest surge, with shares hitting an eight-month high of $456 amid Bitcoin’s rally beyond $120,000.
Despite the downtrend, SMST bounced back 12% on Friday, testing a descending trendline that has defined its bearish trajectory since the ETF’s inception in August 2024. It held steady near $20 during Monday’s trading session.
Bullish Fund Bleeds Over $118M
While bearish bets gain traction, investors are pulling back from the bullish trade. The Defiance Daily Target 2x Long MSTR ETF (Nasdaq: MSTX)—which offers 2x daily exposure to MicroStrategy’s upside—has suffered over $118 million in net outflows since July 11.
MSTX fell 12% on Friday to $42.30, where it remained on Monday. The parallel price moves and diverging capital flows between SMST and MSTX suggest a shift in sentiment, possibly driven by profit-taking or concerns that MicroStrategy—and Bitcoin—may be nearing short-term tops.
Market Signals Shift in Positioning
The opposing flows into SMST and out of MSTX highlight a potential recalibration of directional bets by sophisticated traders. With MicroStrategy’s stock heavily correlated to Bitcoin’s price action, leveraged ETF flows often reflect short-term tactical views rather than long-term conviction.
As Bitcoin continues to hover near all-time highs, the market may be bracing for increased volatility or a pullback—prompting traders to hedge gains or take contrarian positions.
