Anti-Strategy Leveraged ETF Hits Rock Bottom on Near-Record Trading Volumes

Those betting against bitcoin

-holder MicroStrategy (MSTR) seem to have run out of patience and look to be exiting bearish bets.

On Monday, a U.S.-listed exchange-traded fund (ETF) that provides a leveraged bearish exposure to shares of bitcoin holder MicroStrategy sank to lifetime lows on the back of near-record trading activity.

Prices for the Defiance daily target 2x short MSTR ETF, listed under the ticker SMST on Nasdaq, slipped 7.58% to $18.17 on Monday, hitting a record low for the fourth consecutive day, according to data source TradingView.

The decline happened as 2.88 million shares changed hands, the second-largest trading volume tally ever.

Bears capitulate as BTC surges

SMST’s high-volume collapse points to capitulation of bears – those betting against MSTR have likely given up and are exiting the market.

A high-volume record low typically indicates capitulation – market participants surrendering to the relentless bearish trend and exiting all their positions, giving up all hope of a recovery. This type of price action often marks peak bearishness in the market or bottoms.

Bitcoin’s price tapped record highs above $122,000 during Monday’s Asian trading hours, providing bullish cues to all things tied to crypto. Later in the day, shares in MSTR rose over 3% to $456, the highest since November.

Leveraged bearish bet

The 2x short ETF seeks to deliver daily investment results that are -200%, or minus 2x, the daily percentage change in the MSTR share price. In other words, it’s a leveraged bearish bet.

The ETF’s price, however, has collapsed from over $2,000 on the inception day in August last year, and has been primarily in a downtrend, barring the brief uptrend from $1,600 to $2,368 in late August last year. As of Friday, the fund had a net inflow of $8.2 million in six months, according to VettaFi.

MSTR’s share price has increased multi-fold from $100 to over $440 during the same time. MicroStrategy is the largest publicly-listed bitcoin holder in the world, boasting a coin stash of 601,550 BTC ($70.56 million) as of writing.

2x long MSTR ETF rises

The Defiance daily target 2x long MSTR ETF rose to nearly $50 on Monday, the highest since January 24, with trading volumes rising for the fourth straight day to tally 9.2 million.

As of Friday, MSTX had a net six-month outflow of over $175 million, per VettaFi.

Read more: Anti-Bitcoin Vanguard Might Be the Largest Institutional Holder of MSTR Stock