Short Sellers Retreat as Defiance 2x Short MSTR ETF Hits Fresh Lows
15 July 2025
Traders betting against MicroStrategy (MSTR) are backing off, as the Defiance Daily Target 2x Short MSTR ETF continues its steep decline, reaching new record lows for the fourth straight day.
Bearish ETF Slides Again
On Monday, the Defiance ETF, trading under the ticker SMST on Nasdaq, fell 7.58% to close at $18.17 — its lowest level yet, according to TradingView data. Trading activity was intense, with 2.88 million shares exchanging hands, the fund’s second-highest volume on record.
This heavy selling suggests capitulation among bearish traders who had been wagering against MSTR, the largest corporate holder of bitcoin. Typically, high-volume drops to new lows indicate that traders are abandoning their positions, often signaling peak bearish sentiment or even a market bottom.
Bitcoin’s Surge Fuels Pressure
SMST’s decline comes amid bitcoin’s rally to fresh record highs above $122,000 during Asian trading hours on Monday. The crypto surge fueled gains for MSTR shares, which climbed over 3% to $456, marking the stock’s highest price since November.
MicroStrategy’s fortunes are closely tied to bitcoin’s performance, as the company holds a significant bitcoin reserve. As of this writing, MicroStrategy owns 601,550 BTC, valued at approximately $70.56 million.
How the Leveraged Short ETF Works
The Defiance 2x Short MSTR ETF is designed to deliver -200% of MSTR’s daily percentage move, making it a leveraged instrument for those betting against the stock. However, the ETF has mostly trended downward since launching last August, dropping from over $2,000 to under $20. Aside from a brief rally between $1,600 and $2,368 in late August, the fund has struggled. Despite the losses, SMST attracted net inflows of $8.2 million over the past six months, per VettaFi data.
During the same period, MSTR shares have surged from around $100 to above $440, driven largely by bitcoin’s strong performance.
Long ETF Sees Gains
Meanwhile, the Defiance Daily Target 2x Long MSTR ETF (MSTX) rallied close to $50 on Monday, its highest since January 24. Trading volumes in MSTX have climbed for four consecutive days, hitting 9.2 million shares on Monday.
Despite its recent gains, MSTX has recorded net outflows exceeding $175 million over the last six months, according to VettaFi.
The recent price movements highlight how bitcoin’s rise is reshaping sentiment toward crypto-exposed stocks like MicroStrategy. With MSTR shares climbing, traders who bet against the company are rapidly unwinding positions, leaving leveraged bearish funds like SMST deep in negative territory.
