Millions Flow Into Bearish Leveraged ETF as Prices Hit Historic Lows

A leveraged bearish ETF targeting MicroStrategy (MSTR) has seen a surge in inflows over the past week, even as its price touched all-time lows — signaling renewed investor interest in downside exposure to the Bitcoin-linked stock.

The Defiance Daily Target 2x Short MSTR ETF (Nasdaq: SMST) has attracted over $24 million in net inflows since July 11, according to VettaFi data. On July 16 alone, the fund saw more than $10 million in inflows — its largest single-day total since March 26.

SMST offers -2x daily leveraged exposure to MicroStrategy shares, effectively allowing traders to profit from a decline in the stock’s price. The fund’s recent inflows appear to reflect bargain hunting by investors as SMST dropped to a record low of $17.68 last week, during a surge in Bitcoin that pushed the cryptocurrency above $120,000. MicroStrategy, one of the largest corporate holders of Bitcoin, saw its stock hit an eight-month high of $456.

Despite the decline, SMST rebounded 12% on Friday, nearing a long-term descending trendline that has defined the ETF’s downtrend since its launch in August 2024. The fund held steady around $20 on Monday.

Bullish Counterpart Sees Outflows

In contrast, the Defiance Daily Target 2X Long MSTR ETF (Nasdaq: MSTX) — which provides 2x daily bullish exposure to MSTR — has experienced sharp outflows. Since July 11, investors have withdrawn more than $118 million from the long ETF.

MSTX dropped 12% on Friday to $42.30 and remained at that level on Monday.

The simultaneous inflows into SMST and outflows from MSTX suggest a potential sentiment shift among leveraged traders, possibly reflecting concerns that MicroStrategy’s recent rally — driven by Bitcoin’s strength — may be overextended or due for a pullback.