Bearish ETF Attracts Capital Inflows Even as It Trades Near All-Time Lows

A leveraged bearish ETF tied to MicroStrategy is seeing renewed investor interest, even as it trades near record lows—highlighting a potential turn in sentiment amid Bitcoin’s relentless ascent.

The Defiance Daily Target 2x Short MSTR ETF (SMST), which provides -2x daily exposure to MicroStrategy shares, has accumulated over $24 million in net inflows since July 11, per VettaFi data. The largest daily inflow—over $10 million—came on July 16, marking the fund’s strongest single-day intake in nearly four months.

SMST hit a low of $17.68 last week, just as MicroStrategy stock surged to $456, an eight-month high, powered by Bitcoin crossing $120,000. Despite that pressure, SMST rallied 12% on Friday, approaching a long-term downtrend line established since its August 2024 inception. It remained steady around $20 on Monday.

Bullish Fund Bleeds Capital

While the short ETF saw strong inflows, the Defiance Daily Target 2x Long MSTR ETF (MSTX)—its bullish counterpart—has faced significant capital flight. Since July 11, MSTX has recorded over $118 million in net outflows.

MSTX lost 12% on Friday, closing at $42.30, and hovered at that level through Monday’s session.

Sentiment Shift or Strategic Rotation?

The divergence in flows between SMST and MSTX suggests a possible recalibration among leveraged traders—either as a hedge or a short-term contrarian move. With Bitcoin trading near its all-time highs and MicroStrategy closely tied to BTC’s performance, investors may be positioning defensively after a strong run-up.

Both funds are designed for daily tactical exposure, not long-term holding, making them particularly sensitive to shifts in momentum and sentiment. The inflows into SMST could be signaling caution—or expectations of a near-term reversal in MicroStrategy’s recent surge.