Leveraged MicroStrategy Markets Are Riskier Than Ever

As Bitcoin (BTC) moves towards $100,000, traders are using options tied to the stock price of MicroStrategy, one of the largest holders of bitcoin, currently leveraged 2x long exchange-traded fund (ETF) to increase their profits.

The Defiance Daily Target 2X Long MSTR ETF, which trades on Nasdaq under the ticker MSTX, aims to deliver twice the daily performance of MSTR’s share price. The ETF rose 20%, briefly surpassing $180 on Tuesday, while MSTR rose 10% to $473.

Market participants piled into call options that strike higher at $230, according to data obtained by analytics platform ConvexValue.

Extreme bullish sentiment is consistent with the MSTR options market, where options have recently traded at a record premium to puts, which are typically used to hedge against price declines, according to data platform Market Chameleon.

The market frenzy started with the arrival of a pro-crypto government in the US and the Federal Reserve cutting interest rates, which riveted traders’ risk appetite. Having surged above $97,000 in the early hours, BTC is just 3% away from the $100,000 milestone that would push the asset above a $2 trillion market cap.

MicroStrategy is the world’s largest publicly traded BTC holder, with 331,200 ($3.04 billion) of bitcoins it has steadily accumulated since 2020.