Leveraged MicroStrategy exchange-traded funds are firing on all cylinders as inflows and their stocks surge.
MicroStrategy ETFs surge
The Defiance Daily Target 1.75x Long MSTR ETF and the T-Rex 2x Long MSTR Daily Target funds have soared by 28% and 31%, respectively, in the last five days. MSTX and MSTU have also added over $207 million and $300 million in assets this year.
These ETFs have outperformed MicroStrategy stock, which has risen by 16.1% in the last five days.
The three assets continued their strong performance on Monday, Oct. 14, as Bitcoin (BTC) and other cryptocurrencies rebounded. MicroStrategy shares jumped by over 5.3% in pre-market trading, while MSTX and MSTU ETFs rose by 9.50% and 10.6%, respectively.
Bitcoin, the largest cryptocurrency by market capitalization, rose to $65,000 for the first time since Sep. 30, as the crypto fear and greed index exited the fear zone.
The potential catalyst for the rally was the decision by Chinese officials to offer more stimulus. In a statement, Finance Minister Lan Fo’an pledged to continue supporting the ailing property sector and hinted that the government would boost spending.
As a result, analysts at Goldman Sachs boosted their outlook for the economy. They now expect the economy to grow by 4.9%, higher than their previous estimate of 4.7%.
This statement led to a more upbeat tone in the financial markets, with stock indices in the US, Asia, and Europe continuing their uptrend.
MicroStrategy’s shares often react to Bitcoin’s price action due to the company’s substantial holdings. According to BitcoinTreasuries, it holds 252,220 coins in its balance sheet worth $16.3 billion.
MSTU and MSTX offer a high-risk, high-reward opportunity
Leveraged ETFs like MSTU and MSTX offer MicroStrategy investors a high-risk, high-reward opportunity by using leverage.
MSTU’s stock rises by 2x when MicroStrategy rises by 1% in a day, while MSTX rises by 1.75%. As such, their total returns over time are usually strong when MicroStrategy shares are soaring.
MSTU and MSTX aim to replicate the success of other leveraged ETFs, such as the ProShares UltraPro QQQ, which tracks the Nasdaq 100 index. The index has risen by 430% in the last ten years, while the TQQQ fund has jumped by over 2,360% in the same period.
However, the risk comes when the underlying asset underperforms. For example, the TQQQ ETF dropped by 79% in 2022 when the Nasdaq 100 index fell by 32%.
South Korea’s financial watchdog is reportedly set to review the approval of spot crypto ETFs and the legalization of corporate crypto accounts through a newly formed committee.
South Korea, which has been cautious in its approach to crypto regulation, is now considering the approval of spot crypto exchange-traded funds and corporate crypto accounts through its newly established Virtual Assets Committee.
According to a News1 Korea report on Oct. 10, the committee, chaired by the Financial Services Commission’s vice chairman, will include representatives from several government ministries and private-sector experts. While Bitcoin (BTC) and Ethereum (ETH) have secured approval from regulators for spot ETFs in the U.S. and Hong Kong, South Korea has yet to allow such products, and corporate crypto accounts remain prohibited.
However, the report does not indicate a specific timeline for when South Korean authorities will review the approval of crypto ETFs.
South Korea speeds up with crypto regulation
The move comes as the Korean regulatory body faces mounting calls for reform in these areas as the domestic crypto market evolves. Currently, the FSC is processing renewal applications for virtual asset service providers that first registered in 2021, as the regulator pushes amendments to the Specific Financial Information Act, designed to enhance oversight of market manipulation and unfair trading practices, the report notes.
The FSC reportedly also indicated it is considering “Phase 2 legislation,” which would focus on tighter regulatory controls for crypto businesses, such as issuance and listing requirements, following the recent enactment of the Virtual Asset User Protection Act, introduced in July.
South Korea has been gradually expanding its crypto oversight, focusing on balancing market growth with investor safeguards. As a result, major domestic crypto trading platforms, such as Upbit, have come under increased scrutiny, with the FSC recently investigating the exchange’s dominance and ties with K Bank.
Upbit, which holds around 80% of the local market, is the country’s largest crypto exchange and ranks fifth globally by 24-hour trading volume.
Spot Bitcoin exchange-traded funds in the U.S. recorded outflows of over $300 million this week as global macroeconomic events sparked uncertainty over short-term direction.
After closing the historically bearish September with over $1.1 billion in inflows, roughly $388.4 million moved out of the 12-spot Bitcoin ETF funds between Oct. 1 and Oct. 3 coinciding with the escalating Iran-Israel conflict, which pushed Bitcoin’s price to a weekly low of $60,047.
On Oct. 4, better-than-expected U.S. payroll data brought some relief to the market, allowing Bitcoin to reclaim the $62,000 level, while ETF products saw $25.59 million in inflows.
However, this recovery wasn’t enough to fully offset the impact of the three-day outflow streak.
Since Sept. 13, three consecutive weeks of inflows brought in about $1.91 billion into spot Bitcoin ETFs, but this week’s outflows caused these funds to end the first week of October in negative territory, with $301.54 million flowing out, according to SoSoValue data.
Underlining the last trading day’s activity, Bitwise’s BITB saw the most inflows, while seven out of the twelve Bitcoin ETF products, including BlackRock’s IBIT, saw no movement.
Bitwise’s BITB led with inflows of $15.29 million.
Fidelity’s FBTC, $13.63 million.
ARK and 21Shares’ ARKB saw its first inflow this week, bringing in $5.29 million.
VanEck’s BTCW, $5.29 million.
Grayscale’s GBTC recorded outflows of $13.91.
Analysts point to key levels
Besides the ETF market, some selling pressure also came from Bitcoin miners, who, according to crypto analyst Ali, have offloaded approximately $143 million worth of Bitcoin (BTC) since Sept. 29. See below:
The selling activity could intensify, according to Ali, who pointed out in a subsequent X post that Bitcoin had been trading below the short-term holders’ realized price, which currently stands at $63,000.
This price represents the average cost at which short-term investors acquired their Bitcoin, and when the market dips below it, these holders are more inclined to sell in an attempt to minimize losses—risking a “cascading sell-off” that could exert further selling pressure.
As such, Ali advised investors to watch the $63,000 mark as the next key level that BTC needs to conquer to avoid further losses.
On the other hand, Crypto analyst Immortal pointed to a slightly higher short-term target of $64,000, adding that if the flagship cryptocurrency manages to break above this key resistance level, it could signal the beginning of a strong bullish move.
However, on a longer time frame, experts remain optimistic, citing Bitcoin’s historical Q4 performance and expectations of U.S. rate cuts, which could drive prices toward the $72,000 range despite short-term volatility.
At the time of writing, Bitcoin was hovering just above $62,200, marking a drop of over 5% in the past week.
Meanwhile, market sentiment appears to be picking up, with the Fear and Greed Index nudging back to a neutral 49, up from a more cautious 41 the previous day, per data from Alternative.
Taiwan’s financial regulator has authorized professional investors to access foreign crypto exchange-traded funds through local brokers.
Professional investors in Taiwan can now access foreign crypto exchange-traded funds through local securities firms, as approved by the Financial Supervisory Commission to diversify investment options while managing associated risks.
According to a Sept. 30 press release, the FSC’s new policy limits access to foreign crypto ETFs to professional investors, including institutional investors, high-net-worth entities, and individual investors classified as professionals due to the “complex nature of virtual assets and their significant price volatility.”
Securities firms are now required to establish suitability assessments for virtual asset ETF products, which must be approved by their board of directors. Prior to initial purchases, firms also “must assess whether the client has the necessary expertise and experience in virtual asset and related product investments to determine the suitability of the investment,” the press release reads.
The FSC said it also plans to continuously monitor the implementation of these measures, aiming to safeguard investor interests while enhancing the “competitiveness of securities firms.”
Taiwan joins a growing number of markets recognizing the demand for crypto-linked investment products, although regulatory caution remains high amid concerns over volatility and investor protection.
Earlier this year, FSC Chairman Huang Tianzhu highlighted increasing concerns regarding fraudulent crypto activities, signaling that strict administrative penalties would be enforced on crypto exchanges and foreign currency merchants. He reiterated that cryptocurrencies have no correlation to the real economy and warned of rising investment disputes and risks associated with unregulated overseas investments.
VanEck announced today its decision to close and liquidate its Ethereum Strategy ETF, which is listed on the CBOE.
The Ethereum (ETH) ETF fund (ticker symbol ‘EFUT’) will cease trading after the market closes on Sept. 16, according to a VanEck press release, with liquidation expected around Sept. 23.
Shareholders who still hold EFUT shares on the liquidation date will receive a cash distribution based on the net asset value of their holdings.
The decision follows VanEck’s regular evaluation of factors such as “performance, liquidity, assets under management, and investor interest, among others.” According to the release, these criteria and other operational considerations led to the fund’s closure.
VanEck’s recent ETH moves
VanEck’s move comes after the approval of a spot Ethereum exchange-traded product, which may have influenced the decision to discontinue the futures-based ETF.
An ETP directly exposes an asset by holding it or its equivalent, like spot Bitcoin (BTC) or Ethereum. A futures ETF tracks the price of futures contracts, offering indirect exposure to an asset’s future price movements.
Investors may also receive a final distribution of any remaining net income or capital gains before the fund’s dissolution. For tax purposes, the company will provide a final report at year-end detailing any capital gains or losses associated with the liquidation, per the press release.
In January, VanEck announced the liquidation of its Bitcoin Strategy ETF, citing performance, liquidity, and low investor interest. The ETF, which primarily invested in Bitcoin futures, was set to be delisted after January 30.
Coinbase stock slipped for eight straight days, the longest losing streak since July, as cryptocurrencies continued falling.
Coinbase is facing major headwinds
Decentralized and centralized exchanges have come under pressure as cryptocurrency volume has dropped in the past few months.
Data from DeFi Llama shows that the volume traded in DEXs peaked at $260 billion in March and then retreated to $175 billion in August. More data shows that the volume traded on CEX platforms stood at $1.2 trillion in August, down from $2.48 trillion in March.
This volume has dropped due to the weak performance of Bitcoin (BTC) and other altcoins. Bitcoin remains in a bear market after falling by over 23% from its highest point this year. Similarly, Ethereum (ETH) has dropped by 41% from its year-to-date high, while Solana (SOL) is down by over 36%.
In most cases, the volume on crypto exchanges closely correlates with price movements. For example, Coinbase’s total volume in Q1 was over $300 billion as cryptocurrencies surged. Its volume dropped to $226 billion in Q2 as prices fell.
Coinbase stock’s retreat has also coincided with the sluggish performance of spot Ethereum and Bitcoin ETFs. Data from SoSoValue shows that spot Bitcoin ETFs have shed assets over the last seven consecutive days. Ethereum ETFs have also lost assets in six of the last seven weeks. ETF asset flows are important for Coinbase since it is the custodian of choice for most funds.
Meanwhile, Base, the company’s layer-2 network, has also lost assets in the last seven days. It has over $1.4 billion in assets, making it the sixth-biggest chain in the industry. The volume of coins traded in its DEX platforms fell by 10% to $3.06 billion, bringing its cumulative total to over $93 billion.
Technically, Coinbase stock has formed several bearish patterns, signaling more downside. It formed a slanted double-top pattern, with its neckline at $195.40, its lowest swing on May 14. It dropped below this neckline last week.
The stock has also moved below the 50% Fibonacci retracement level and the 200-day Exponential Moving Average. Most notably, it fell below the crucial support level at $162, its lowest swing in August, invalidating the double-bottom pattern that was forming.
Therefore, the path of least resistance is downward, with the next reference level to watch at $137.70, the 61.8% retracement point, and 15% below the Sep. 6 level.
Spot Bitcoin exchange-traded funds in the United States witnessed a four-month-high net outflow on Tuesday, Aug. 3.
According to data provided by Farside Investors, the U.S.-based spot Bitcoin (BTC) ETFs saw $287.8 million in net outflows yesterday, continuing their five-day downward momentum. This amount of outflows has not been seen since May 1.
Data shows that most of the outflows came from Fidelity’s FBTC and Grayscale’s GBTC funds, worth $162.3 million and $50.4 million, respectively.
Moreover, the ARK 21Shares ARKB and Bitwise’s BITB ETFs also recorded $33.6 million and $25 million in outflows, per Farside Investors. EZBC, HODL, BRRR and BTCO funds joined the bearish momentum with $8.4 million, $3.3 million, $2.5 million and $2.3 million in outflows, respectively.
The largest spot BTC fund with over $20.9 billion in total inflows, BlackRock’s iShares Bitcoin Trust ETF, remained neutral along with BTCW and Grayscale’s mini BTC fund.
Bitcoin dropped 4.6% in the past 24 hours and is trading at $56,330 at the time of writing. The leading cryptocurrency briefly touched a one-month low of $55,670 earlier today.
Spot Ethereum (ETH) ETFs also remained bearish with a net outflow of $47.4 million on Aug. 3, according to Farside Investors. Grayscale’s ETHE saw $52.3 million in outflows while Fidelity’s FETH recorded $4.9 million in inflows.
The remaining spot ETH funds stayed neutral.
Ethereum’s price also declined by 5.5% over the past day and is changing hands at $2,370 at the time of writing.
The newly launched MicroStrategy leveraged ETF, trading under the ticker $MSTX, is rapidly gaining traction on Wall Street.
The MSTX ETF has amassed $127 million in assets within just six days of its debut, said Eric Balchunas, senior ETF Analyst for Bloomberg.
The ETF, which seeks to deliver 175% of MicroStrategy’s daily stock return, has been trading at over $100 million in volume per day, showing strong investor interest in MicroStrategy and Bitcoin (BTC).
On August 23, the ETF surged by 20% after a volatile week that included a 10% decline the previous day. Due to its high volatility and potential for significant short-term gains and losses, Balchunas described the ETF as the “mechanical bull” of ETFs.
Issued by Defiance ETFs, known for its thematic and leveraged funds, $MSTX allows investors to amplify their exposure to Bitcoin, as MicroStrategy’s stock is widely viewed as a proxy for the cryptocurrency.
MicroStrategy’s goals
MicroStrategy is one of the largest corporate holders of Bitcoin. The company recently announced plans to raise $2 billion by selling its class A shares to further invest in Bitcoin and repay debt.
In its Q2 financial results, MicroStrategy reported acquiring 12,222 Bitcoin at a total cost of over $805 million, bringing its total Bitcoin holdings to 226,500.
South Korea’s National Pension Service has invested $33.75 million in 24,500 shares of MicroStrategy, and other funds like Japan’s GPIF and Michigan’s Retirement System are also participating through ETFs. This growing institutional interest suggests a cautious but notable shift towards integrating Bitcoin into traditional investment portfolios.
It’s been an “exceptionally eventful month” for Bitcoin (BTC). BTC whale transactions reached a four-month high while the market “purged” short-term holders. The unrealized losses for speculators touched crypto assets worth millions of US dollars. Such wipeouts reiterate the pressing need to foster long-term adoption.
Meanwhile, investors are ‘buying the dip,’ and spot Bitcoin ETFs recorded some of the highest single-day inflows.
So, the short-term bleeding and apparent mayhem coexist with overall bullishness and demand. And as David Canellis of Blockworks recently wrote:
“…We may be finally ready to put the worst dramas in crypto history to bed, for good.”
Rising above the typical numbers-go-higher (or lower) view, Bitcoin is experiencing a renaissance, mainly from the asset perspective: It’s outgrowing the ‘digital gold’ image and expanding on the utility front.
BTC is finally a ‘productive asset’ thanks to the evolution of Bitcoin defi, or BTCfi. Plus, Layer-2s like Stacks bring programmability to the world’s most decentralized and secure blockchain. Bitcoin is becoming the home for new-age dApps—Stacks is dominating this $1 trillion opportunity. And there’s a lesson in being early and consistent here.
Slowly at first, then all at once
Bitcoin and the economics it supports are based on the principle of low-time preference. It’s a feature, not a bug. Rome was not built in a day. But it is easy to lose sight of this reality amidst all the noise in crypto.
BTCfi started getting the hype and attention it deserves after Ordinals and BRC20 launched in 2023. They were indeed the first practical evidence that Bitcoin can be much more than a store of value. Yet the primitives for a fully functional BTCfi have been in production for much longer. Stacks launched in 2013, for instance, and created Clarity in 2021, the programming language for Bitcoin-compatible smart contracts.
More importantly, they developed the proof of transfer (PoX) consensus mechanism, enabling L2 chains to inherit Bitcoin’s security without additional energy expenditure.
“People have attributed the paucity of innovation to a lack of #BTC functionality…But is there another way? A way to bring smart contracts more directly to Bitcoin without needing changes in the core?
These early innovations laid the foundation for the now-booming Bitcoin L2 ecosystem, which currently has over $2 billion in TVL. Nevertheless, the need to scale Bitcoin on the second layer became truly apparent only when Runes sent the network’s fees through the roof after the halving.
Remember when we told you that Bitcoin fees will do a 500x?
Yeah we’ve been working on Bitcoin L2s for a reason. Happy halving everyone!
That’s the nature of lasting technological change. They emerge slowly at first, then all at once. And when that happens, visionaries who thanklessly build real solutions—before others even start caring—hit the home run.
Is it working or not? — That’s the question
Despite its merits, being early is not the endgame. The crypto community has seen enough lip service over the years. They want actual results now. It ultimately boils down to the question of impact, and that’s great.
Most existing Bitcoin L2s fail to solve the Impossible Trinity. They are either loosely linked to the Bitcoin L1 at best or highly centralized at worst. Only a few projects like Stacks have made the right trade-offs, even if that meant angering a few maxis. Commitment to the core Bitcoin ethos separates L2s that are hosting dApps and those relying solely on marketing gimmicks or speculative price action.
Stacks took a giant leap forward in this direction with its performance-enhancing Nakamoto Release with a trustless two-way BTC pegging mechanism, a.k.a. sBTC. The impact of this move is reflected in Stacks’ growing number of monthly active accounts, which reached an all-time high of over 1.2 million in Q2 2024.
Moreover, Stacks currently has a TVL of over $68 million, as most of the top Bitcoin dApps are building on this platform. Slowly yet steadily, they are helping improve Bitcoin’s TVL-to-market-cap ratio, which was a mere 0.2% in May 2024, vs. Ethereum’s 17%.
Alongside the evolution of Bitcoin dApps, top VCs and investors are backing the production of AI-powered interoperability and bridging solutions. These tools will further improve Bitcoin’s liquidity situation. AI Agents, for example, will allow users to seamlessly move funds to the Bitcoin ecosystem even without complex technical understanding or know-how. This means they can better integrate Bitcoin dApps into their workflows while simultaneously benefitting from other chains.
It won’t be a zero-sum game anymore, which is great for holistic growth. Given such developments, the next ‘defi Summer’ on Bitcoin is a tangible, almost imminent reality. It’s no longer an optimist’s fantasy.
BTCfi has found its inflection drivers, and it can soon become at least as big as defi on Ethereum. Ideally, though, it can be way bigger thanks to Bitcoin’s over 54% market dominance.
The biggest appeal of BTCfi innovations is that they primarily enhance and expand the underlying native asset. It is not a zero-sum game where projects extract the maximum value at the cost of end-users and devs.
Rather, it’s a collective effort to ensure grassroots empowerment and financial freedom. Bitcoin-based dApps are the means to a greater end. They represent a philosophy where tech becomes the engine for individual sovereignty and freedom, not just an enabler of selfish, short-term gains. It’s a question of bringing meaningful change to the lives of the next one billion crypto users and beyond. That will lead to a better world, financially and otherwise.
