The T-Rex 2X Long MSTR Daily Target ETF (MSTU), which aims to deliver twice the daily returns of MicroStrategy's stock, soared 6.85% on Tuesday. The surge in MSTU can be primarily attributed to the continued enthusiasm surrounding MicroStrategy and its CEO Michael Saylor, who is considered a "Bitcoin guru" among crypto enthusiasts.
MicroStrategy, a data analytics and software company, has amassed over $37 billion worth of Bitcoin, making it the largest corporate holder of the cryptocurrency. As MicroStrategy's stock has skyrocketed over 500% this year, significantly outpacing even Bitcoin's gains, leveraged ETFs like MSTU that track the stock have seen astronomical returns.
However, it is crucial to understand that leveraged ETFs like MSTU are primarily intended for short-term trading due to the effects of compounding and path dependency. Over longer periods, these ETFs can deviate significantly from their stated multiples, potentially leading to disappointing or even negative returns, even if the underlying stock's overall performance is positive.
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