Bitcoin’s sharp decline triggered its worst day since March, but the fallout has been far more severe for investors in crypto-proxy Strategy Inc. (formerly a software firm) and a suite of highly leveraged exchange-traded funds (ETFs) tied to its stock.

The Damage in Numbers:

• Strategy Inc. Stock: Shares have plunged over 66% from recent highs and fell 34% in November alone. The stock dropped 12% on Monday before paring losses after the company announced a $1.4 billion reserve to cover dividend and interest payments for 21 months.
• Leveraged ETFs: Two popular ETFs offering 2x daily leveraged exposure to Strategy’s stock have been decimated:
  • MSTX and MSTU are both down over 80% in 2025, ranking among the 10 worst-performing funds in the nearly 5,000-product U.S. ETF market.
  • A third fund, MSTP, launched in June, has seen similar losses.
• Asset Erosion: Combined assets in MSTX, MSTU, and MSTP have collapsed from over $2.3 billion in early October to roughly $830 million today—a loss of $1.5 billion in just two months.

Why the Carnage?

“The recent pullback in Bitcoin has hit Strategy’s stock hard, and 2x leveraged plays like MSTX and MSTU turn that into even larger losses,” said Roxanna Islam of VettaFi. “It’s a reminder that leveraged single-stock ETFs can look great on the way up, but can erase gains very quickly when the underlying trade goes the other way.”

Underlying Risks for Strategy:

• CEO Phong Le previously warned that if the company’s market net asset value (mNAV) falls below 1.0, it might be forced to sell Bitcoin holdings to meet payout obligations.
• JPMorgan analysts cautioned that Strategy could be removed from major indices like the MSCI USA and Nasdaq 100, potentially triggering billions in passive outflows and further pressuring the stock.

Broader Context:
The steep declines highlight the extreme volatility and risks embedded in leveraged single-stock ETFs, especially those tied to a volatile asset like Bitcoin through a proxy stock.