Summary I recommend avoiding the T-REX 2X Long MSTR Daily Target ETF due to excessive complexity and risk. MSTU’s leveraged exposure to Strategy, which itself is highly leveraged to Bitcoin, compounds risk and magnifies downside scenarios. Strategy’s financing relies on STRC preferred shares with 11.5% dividends and significant convertible debt, creating liquidity risks if Bitcoin declines. The risk-return profile of MSTU is unattractive, especially given the complex capital structure and potential for a negative feedback loop in a Bitcoin downturn. Investment Thesis I recommend investors stay away from the T-REX 2X Long MSTR Daily Target (BATS: MSTU ) ETF. My intention in this article is to answer a question from a follower who is intrigued by the recent rise in Bitcoin and asked me what I thought of Strategy's leveraged ETFs. What is the Best (or Worst) Leveraged ETF for This Topic? Before starting the reasoning, the question caught my attention, and I looked for the main leveraged ETFs for the objective, and they are below. Initially MSTU seems the most interesting, as it gives 2x leverage to the theme with the highest liquidity ($574 million in AUM) and lowest expense ratio (1.05%), which is why I will focus the analysis on this ETF. Comparison (Seeking Alpha) Manager Tuttle Capital delivers 2x the daily performance of Strategy ( NASDAQ: MSTR ) through swaps and derivatives. This option is not ideal for you to buy and expect 2x the performance of Strategy shares in the medium and long term (weeks, months, or years). This ETF should be used by bold investors (usually day traders) who want short-term exposure to the thesis. Context I'm not sure if the question originated from my investment theses in Bitcoin and in leveraged ETFs on other themes; maybe not. I will preserve the identity of what follows, but I confess that I found the topic relevant to also explain the strategy of Michael Saylor's company. What Does Strategy Do? The company is a Bitcoin treasury and has 815,000 bitcoins, almost 4% of the total bitcoins that will be produced. The market believes that Michael Saylor's company could reach 1 million Bitcoins this year due to its aggressive purchases. If you're not familiar, almost every Monday Michael Saylor posts that he purchased a certain number of Bitcoins. Strategy is by far the company with the most Bitcoins in the world. Top 100 Public Bitcoin Treasury Companies (BitcoinTreasuriesNet) But how does the company finance all these purchases? There are two ways! The first is through the sale of MSTR common shares on the market, and the second is the issuance of preferred shares called STRC (NASDAQ: STRC ) that distributes dividends. As stated, Strategy's average Bitcoin price is $75,527, so if Bitcoin falls below this price, the company will make a loss. Purchase (Website) For those who don't know, the company also has STRC shares, which pay dividends of 11.5% per year (and increasing). Dividend Rate History (Binance) This is relevant because regardless of whether the price of Bitcoin rises or falls, the company will have this obligation to pay dividends to investors. The STRC is fundamental to understanding the thesis. How Does STRC Work? Since it was created, the dividend has only been increasing. This is because the STRC was created to always trade close to $100 as its face value, similar to a bond. When the share price drops below this, the company increases its dividend to attract new investors, which causes the share to rise and return to close to $100. The following graph shows how this strategy has worked over time. Price & Volume (Binance) On the other hand, if at any point the STRC rises above $100, the company may reduce dividends (because Strategy will not need to attract the investor's attention). Therefore, the less attractive the crypto market is, the more expensive it is to keep STRC trading close to $100. Understanding the Strategy in Depth Strategy raised more than $7 billion to buy Bitcoin through this STRC engineering last year. In 2026, the company intends to make its preferred stocks more compelling. But if the price of Bitcoin remains low for a long time, the company may not have the strength to keep the STRC close to $100, which could reduce financing for Bitcoin purchases. Now let's get to the numbers! If the company has $7 billion in issued STRC shares and obligations to pay 11.50% in dividends, there is an annual payment obligation around $805 million. But Bitcoin doesn't generate dividends; where will the capital come from if the market turns sour? The company has a cash reserve of $1.4 billion , so the cash would cover just over a year and a half of operations. But if the winter is longer, there is a problem, as the issuance of new shares may not attract investors, and then the company would have to sell Bitcoins. The Domino Effect of Bitcoin Sales Of course, this is an extreme scenario, but it can happen! Therefore, let's imagine a scenario in which Bitcoin falls below $40,000 (a hypothesis raised by Saylor) for a period longer than a year. In this case, the m/NAV plummets, and the company will not be able to issue new shares. In parallel, STRC would trade below $100 frequently, which would require increasing the dividend and would drain cash quickly. In this scenario, cash reserves would probably not last a year, and the company would have to sell its Bitcoins at some point. This could generate a dangerous domino effect; after all, the sale of Bitcoins would put pressure on the price of Bitcoin, which worsens the company's situation. In parallel, the market will see the desperate company itself selling its Bitcoins and may sell along. My Verdict If used intelligently, leveraged ETFs are excellent, but in this case, did you realize how extremely complex this Strategy leverage engineering is? So why expose yourself to this leveraged thesis? Therefore, to answer the follower's question, I do not recommend buying the T-REX 2X Long MSTR Daily Target ETF due to the complexity of the thesis and leverage. Risks The scenario I discussed is Strategy's nightmare; however, the company can take several measures to prevent the worst-case scenario. Before this extreme, they could very well abandon the face value strategy or also reduce dividends to maintain operations for a longer time. Not to mention that when the m/NAV drops below 1, investors can see this as an opportunity and buy, which also holds the price down. Finally, perhaps the biggest risk mitigator is that the majority of Strategy's debt is made up of bonds that can be converted into MSTR shares upon maturity. This means they do not require cash payment and can be converted directly into shares. The first large batch of this debt only matures in 2028 and the next in 2029. The Bottom Line I reiterate the statement that I find leveraged ETFs quite interesting. However, they are interesting when you need exposure to an asset with low volatility or when you believe there is a short window for an investment and you want to amplify the return. However, neither of the two reasons above applies in the current case. What it seems is that Bitcoin should rise again with low volatility, not to mention that the company's strategy is extremely complex, and there is no need to amplify this complexity with a leveraged ETF. Based on this analysis, I recommend that investors stay away from MSTU. The risk-return ratio is definitely not attractive here.
