Retail crypto ETFs sink over 80% as strategy Inc. shares dive

Retail investors who chased leveraged exposure to Bitcoin through ETFs tied to Strategy Inc. are facing massive losses as the company’s stock collapses in tandem with a broader crypto selloff.

Strategy Inc., once celebrated as a pioneering way for retail traders to gain amplified Bitcoin exposure via the stock market, is scrambling to restore confidence after its shares plunged more than 60% from recent highs. The drop follows a sweeping rout in digital assets and has triggered severe losses in leveraged ETFs that track the company’s volatile stock movements.

On Monday, Strategy announced the creation of a $1.4 billion reserve to cover dividend and interest payments for at least 21 months. The move was designed to reduce fears that the firm could be forced to liquidate Bitcoin holdings if the cryptocurrency continues to slide. But for many investors, the damage has already occurred.

The three most popular leveraged ETFs tied to Strategy’s stock — MSTX, MSTU and MSTP, each offering double the daily return — have plunged over 80% in 2025, placing them among the 10 worst-performing ETFs in the U.S. market. The trio has collectively shed around $1.5 billion in assets since early October, as Bitcoin tumbled roughly 30% from its highs and Strategy’s stock slumped 34% in November.

Analysts warn that the sharp declines highlight the inherent risks of leveraged single-stock ETFs. “Leveraged plays like MSTX and MSTU look great on the way up, but they can erase gains incredibly quickly,” said Roxanna Islam, head of sector and industry research at TMX VettaFi.

Concerns are growing around Strategy’s valuation premium — known as mNAV, which compares enterprise value to Bitcoin holdings. The premium has nearly disappeared, slipping to around 1.15. Management has previously flagged anything near 1.0 as a danger zone that may force Bitcoin sales to meet obligations.

To continue expanding its Bitcoin reserves, Strategy has relied on repeated stock issuance — a dilution-heavy funding model that’s now under pressure as the valuation premium fades. The firm has increasingly turned to preferred shares and other costly financing tools to maintain its Bitcoin strategy.

Meanwhile, the ecosystem of ETFs built around Strategy is also under strain. At least 15 such products are trading in the U.S., many posting double-digit declines amid volatile market conditions and a downturn that has hit miners, altcoins and crypto-centric companies.

The fallout is now threatening Strategy’s inclusion in major equity indexes. JPMorgan analysts warn that the company could face removal from key benchmarks such as the Nasdaq 100 and MSCI USA, potentially triggering billions in passive outflows.

For a company once touted as a possible S&P 500 entrant, the reversal underscores how quickly leverage, sentiment and crypto volatility can unwind speculative gains.