Crypto Slump Hits Strategy Leveraged ETFs Hard – December 2025 Market Analysis

Crypto Slump Hits Strategy Leveraged ETFs Hard

In recent days, the crypto market's sharp downturn has severely impacted Strategy Inc.'s leveraged ETFs, causing substantial losses for investors. ETFs designed to amplify the company’s stock price, such as T‑Rex 2X Long MSTR Daily Target ETF and Defiance Daily Target 2x Long MSTR ETF, have lost nearly 85% of their value this year. Similarly, the T-Rex 2X Inverse MSTR ETF has declined by approximately 48%, while Strategy Inc.’s stock value itself has dropped around 40%, largely due to falling Bitcoin prices.

The broader crypto market, especially Bitcoin, has also experienced significant declines. Bitcoin’s price fell nearly 8% in a single day, reaching $83,824. During this period, roughly $1 billion in leveraged crypto positions were automatically liquidated, meaning leveraged bets were canceled, further driving the market downward. This extreme volatility doubled the losses for investors, particularly those who invested in these ETFs seeking high returns.

Leveraged ETFs are designed to deliver amplified returns when the market rises but magnify losses when the market falls. Strategy Inc.’s ETFs operate based on the value of its Bitcoin holdings. When crypto prices decline, the company may need to liquidate assets to cover debts or obligations, raising concerns that Strategy Inc. might have to adjust its operational model if the downturn continues.

This serves as a critical lesson for investors: “High potential returns” come with “high risk.” Due to the unpredictable nature of the crypto market, highly leveraged ETFs may be dangerous for long-term investments. Investors considering crypto-linked ETFs in the future may benefit from focusing on spot ETFs or funds with lower leverage to reduce risk exposure.

The 2025 crypto slump proves that leveraged ETFs, while potentially profitable in booming markets, can expose investors to significant danger. Strategy Inc.’s ETFs, which benefited from the crypto boom of early 2024 and 2025, are now causing losses for investors. This incident is a warning that crypto investments should be guided by realistic strategies, not merely by the promise of quick profits.