Bitcoin's plunge below the key $60,000 level last week created winners in leveraged inverse ETFs betting against some of the crypto market's most closely watched stocks.
The T-Rex 2X Inverse CRCL Daily Target ETF (CRCD) surged roughly 82% last week, while the T-Rex 2X Inverse MSTR Daily Target ETF (MSTZ) gained more than 63%, as investors rushed to hedge against mounting pressure on crypto-related equities.
The rally in bearish ETFs coincided with one of Bitcoin's sharpest declines this year. The world's largest cryptocurrency fell about 18% last week and briefly dropped to $59,101 on Friday, marking its first move below $60,000 since late 2024.
Strategy's Weakness Boosts MSTZ
The selloff reverberated across crypto-linked stocks, particularly Strategy Inc (MSTR), the company widely viewed as a leveraged Bitcoin proxy.
Strategy came under pressure after disclosing a small Bitcoin sale, its first since 2022. The announcement raised concerns about the durability of the company's long-standing buy-and-hold strategy and added to fears surrounding corporate Bitcoin treasury models.
Those concerns helped fuel gains in MSTZ, which seeks to deliver twice the inverse daily performance of Strategy shares.
The pressure on Strategy intensified as investors pulled money from Bitcoin ETFs and questioned whether corporate treasury buyers would continue supporting demand for the cryptocurrency during periods of heightened volatility.
Circle Decline Drives CRCD Higher
CRCD posted even stronger returns as shares of Circle Internet Group Inc (CRCL), the issuer of the USDC stablecoin, retreated amid the broader crypto downturn.
The ETF is designed to provide twice the inverse daily return of Circle stock, making it one of the most aggressive bearish vehicles available to investors seeking to profit from declines in crypto-linked equities.
Weakness across digital assets was fueled by a combination of ETF outflows, renewed geopolitical tensions in the Middle East and growing uncertainty surrounding the outlook for crypto-related companies.
Bitcoin Rebounds, But Sentiment Remains Fragile
Bitcoin staged a partial rebound on Monday, climbing as much as 3.8% before trading near $62,800 after Strategy Executive Chairman Michael Saylor disclosed a fresh $101 million Bitcoin acquisition, its first purchase since selling 32 coins at $77,135 last week, leading to a 6% surge in MSTR stock.
The recovery, however, is yet to fully restore investor confidence.
Market participants remain cautious after Bitcoin lost roughly half its value from the record highs reached last year. Richard Galvin, executive chairman of crypto investment firm DACM, said, according to a Bloomberg report, that the firm recently raised cash holdings to their highest level in two years, while Apollo Crypto portfolio manager Pratik Kala described market sentiment as "incredibly shaky."
Investors Continue Betting on Further Downside
For now, the biggest beneficiaries of that uncertainty have been bearish crypto-equity ETFs.
As Bitcoin struggles to regain momentum despite Monday's rebound, funds such as CRCD and MSTZ have emerged among the standout performers in the ETF market, highlighting how quickly sentiment has shifted from chasing crypto gains to positioning for further downside in crypto-linked stocks.
