You Can't Outsmart The Market With A Leveraged ETF

Wall Street always gets paid ...

A hyper-surreal financial landscape: a massive, crumbling rollercoaster made of blue and red stock chart lines twists through stormy clouds, with sections breaking off and dissolving into mist. At the peak, a gambler in a business suit wearing a jester’s hat throws oversized dice into a bottomless pit. Below, a golden Bitcoin floats on a melting pedestal, while a shadowy executive gestures toward a shimmering mirage that fades into a cracked mirror. The sky is filled with floating clocks, melting shapes, and flying dollar bills transforming into butterflies. The mood is whimsical yet ominous, highlighting the folly and decay of chasing leveraged returns.

Definitions

Bitcoin - a confidence game worth over $2 trillion.

MSTR (MicroStrategy) - a financial-product-development firm based on bitcoin.

MSTX - a product designed to 2x the daily return of MSTR.

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MSTX is 2x levered ETF - allegedly tracking Microstrategy (MSTR)

MSTX is a 2x leveraged ETF designed to deliver twice the daily return of MicroStrategy (MSTR). In theory, if MSTR goes up 10% in a day, MSTX should go up 20%.

The investors gamblers seeking this product are not satisfied with bitcoin’s volatility, nor that of MSTR - they want MORE!

The catch is in the “daily” part.

MSTX resets its leverage every day.

it’s not 2x over a year, it’s 2x of each day’s move, compounded.

In choppy markets, this daily reset creates “decay.” - you can see how the blue line drops from 744% to 93% in the chart above.

If MSTR zigzags up and down, MSTX’s compounding math can erode returns, even if MSTR ends up flat or slightly up.

Additionally, fees are higher for leveraged ETFs, and MSTX is no exception. These eat into returns over time.

Over the last year, MSTR has outperformed MSTX, despite MSTX’s promise of 2x returns.

195% vs. 93%

On down days, losses are magnified, and on up days, gains are also magnified, but the math of compounding means …

If you’re holding MSTX for more than a few days, you’re not just betting on MSTR’s direction, you’re betting on the path it takes to get there.

You never quite catch up after a big loss.

“Decay” isn’t just a theoretical risk; it’s a mathematical certainty in volatile markets.

Most of you reading this probably don’t trade stocks - I’d be surprised if anyone other than Austin has even heard of MSTX - but can you think of other leveraged parts of your life? And I’m not talking about finance …

What cans are you kicking down the road in hopes of a future payoff?

Are you promising your friends and family 744% but only delivering 93%?

In a volatile market, the path is your enemy.

Are you an introvert? All good. DM me below 👇🏽