The T-Rex 2X Long MSTR Daily Target ETF (MSTU), a leveraged exchange-traded fund that tracks the stock of MicroStrategy, experienced a significant plummet of 7.54% in the pre-market trading session on Monday.
This sharp decline is closely tied to growing concerns surrounding MicroStrategy's unconventional business strategy of heavily investing in Bitcoin and issuing substantial amounts of equity and debt to fund further Bitcoin purchases.
While MicroStrategy's approach has garnered a "cult following" among investors, it also carries substantial risks. Notably, MicroStrategy's stock is trading at a premium of nearly three times the value of its Bitcoin holdings, raising questions about the sustainability of this valuation. Additionally, the presence of leveraged ETFs like MSTU amplifies the volatility and potential downside risks associated with MicroStrategy's stock movements.
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