Defiance declined to comment. GraniteShares, which is behind MSTP, didn’t comment. Matt Tuttle of Tuttle Capital Management said Strategy’s shifting valuation relative to its Bitcoin stash creates both long and short opportunities for traders.
“When it’s at a premium, especially a large one, then having an inverse can be a great tool,” Tuttle said. “When it’s at a discount, which I think it is now, then that could be a great time to go long with leverage.” Strategy’s market cap is currently below the value of its holdings.
At the center of concern is another key valuation metric known as mNAV — or market net asset value — which compares Strategy’s enterprise value to its Bitcoin holdings. That premium has largely vanished, bringing the ratio to around 1.15 — a level executives have flagged as a warning zone. CEO Phong Le said on a podcast that slipping below 1.0 could force the company to sell Bitcoin to meet payout obligations, albeit only as a last resort.
The newly announced reserve, funded by recent equity sales, is designed to head off that risk. It covers at least 21 months of dividend and interest payments. But the announcement did little to stop the broader slide — or address concerns about Strategy’s exposure to leverage, its dependence on retail appetite, and the mounting strain on its funding model.
To finance its Bitcoin buying spree, Strategy has repeatedly sold common stock, a controversial strategy that dilutes existing shareholders. As its valuation premium has eroded, the company has turned to issuing preferred shares and other costlier forms of capital to keep buying crypto.
Meanwhile, the ETF complex built around Strategy is struggling. At least 15 such products tied to its shares in various ways are now trading — many down double digits this year, according to data compiled by Bloomberg. Combined assets for MSTX, MSTU and MSTP have fallen from over $2.3 billion in early October to around $830 million today.
Crypto’s downturn — despite greater institutional participation and political support from the Trump White House — has triggered sharp drawdowns across miners, altcoins, and token-heavy corporate treasuries. Leveraged ETFs, which gained traction among at-home traders earlier this year, are now among the hardest hit.
The funds are built to double Strategy’s daily moves — a structure that can backfire fast. In volatile markets, compounding gains and losses can chip away at returns even if the stock ends flat, a dynamic known as volatility decay. When Strategy shares tumbled and whipsawed, the ETFs didn’t just track the decline — they magnified it.
“Leveraged ETFs are generally a dangerous investment. A leveraged ETF on shares of a stock that levers up to buy a highly speculative asset is a risk profile of its own,” said Michael O’Rourke, chief market strategist at Jonestrading.
Now, even Strategy’s place in major stock indexes is under threat. Analysts at JPMorgan warned the company could be removed from benchmarks like the MSCI USA and Nasdaq 100 — a shift that might trigger billions in passive outflows. For a firm once floated as a potential S&P 500 candidate, the reversal is stark.
