The crypto market's downturn has dealt a devastating blow to leveraged exchange-traded funds (ETFs) tied to Strategy (MSTR.O), the largest corporate holder of Bitcoin. But here's where it gets controversial: while some see this as a cautionary tale of over-leveraging, others argue it's a temporary setback in the broader adoption of Bitcoin as a treasury asset. Let's dive into the details and explore why this matters.
Imagine a scenario where an investment strategy, once hailed as revolutionary, suddenly finds itself at the mercy of a volatile market. That’s exactly what’s happening to Strategy and its associated ETFs. The T-Rex 2X Long MSTR Daily Target ETF and Defiance Daily Target 2x Long MSTR ETF, both designed to amplify returns on Strategy shares, have plummeted by nearly 85% in 2025. Even the T-Rex 2X Inverse MSTR Daily Target ETF, which bets against Strategy, has lost 48% during the same period. And this is the part most people miss: these losses aren’t just numbers on a screen—they reflect a broader shakeout in the crypto-treasury ecosystem.
Strategy, led by Bitcoin evangelist Michael Saylor, pioneered the buy-and-hold crypto treasury strategy, inspiring dozens of imitators. However, as Bitcoin’s price tumbled from its October high of $126,223.18 to below $90,000, Strategy’s shares have nosedived by over 40% this year. This decline has been exacerbated by global risk aversion, leaving investors questioning the sustainability of such strategies.
Here’s where it gets even more intriguing: Strategy’s CEO, Phong Le, recently hinted on the What Bitcoin Did podcast that the company might consider selling Bitcoin if its market value to net asset value (mNAV) ratio falls below 1. According to Reuters calculations, this ratio currently hovers around 1.1. This statement has sparked debate, as it contradicts Strategy’s long-standing commitment to never selling Bitcoin, regardless of market conditions. Mike O'Rourke of JonesTrading pointed out that such comments could undermine investor trust in the company’s core message.
The financial fallout is undeniable. On Monday, Strategy slashed its full-year outlook to a staggering range of a $6.3 billion profit to a $5.5 billion loss, a far cry from its earlier forecast of $24 billion in net profit. This revision was based on the assumption that Bitcoin would reach $150,000 by year-end—a target now seemingly out of reach. Vincenzo Vedda of DWS succinctly summed it up: ‘Great strategy from Strategy, while prices go up. When they go down, well, the strategic options left to the company are limited.’
Adding insult to injury, short sellers have profited handsomely, raking in over $2.5 billion this year, with $156 million gained on Monday alone, according to Ortex. Strategy’s shares have more than halved since joining the Nasdaq 100 index, dropping 70% from their November 2024 peak.
Despite the bleak picture, analysts remain surprisingly bullish. Of the 16 brokerages covering Strategy, 10 rate it a ‘buy,’ four a ‘strong buy,’ and two a ‘hold,’ with a median price target of $485—implying a 183% surge over the next 12 months. This optimism raises a thought-provoking question: Are analysts seeing something the market isn’t, or are they clinging to a fading narrative?
As Saylor prepares to deliver his keynote, ‘The Undeniable Case for Bitcoin,’ at a Binance conference in Dubai, the irony isn’t lost on observers. While his conviction remains unshaken, the market’s reality tells a different story. Here’s the burning question for you: Is Strategy’s struggle a temporary setback or a sign that the crypto-treasury model is fundamentally flawed? Share your thoughts in the comments—let’s spark a debate!
