The Defiance Daily Target 2X Short MSTR ETF (NASDAQ:SMST) and GraniteShares 2x Long NVDA Daily ETF (NASDAQ:NVDL) are both down today due to their underlying target equities moving in the opposite direction to the moves these ETFs are designed to benefit from.
Key Points
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SMST and NVDL are down today due to MSTR being up and NVDA going down.
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Bitcoin has continued to hold up despite broader market volatility.
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NVIDIA has reported direct hits from tariffs.
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Why SMST Is Falling
SMST gives a 2x inverse exposure to MicroStrategy (NASDAQ:MSTR) stock. MSTR stock is positive today as it has bought $286 million more Bitcoin, and BTC itself is up by 1% today. MicroStrategy owns 531,644 Bitcoins and is raising billions more to keep buying. The market treats MSFT stock as a leveraged bet on Bitcoin and pays a premium for the gains that BTC sees.
For example, BTC is up 38.4% in the past year, but MSTR is up 163.82% in the past year, even though the entire business is basically entirely dependent on Bitcoin.
Conversely, SMST is a leveraged bearish bet on MSTR. Those who believe that MicroStrategy is an unsustainable company due to its debt and Bitcoin exposure are the ones buying the ETF. Unfortunately, the narrative hasn’t played out due to Bitcoin holding steady, and recent comments from Federal Reserve Chairman Powell about crypto becoming more mainstream caused an uptick in BTC.
Why NVDL Is Falling
GraniteShares’ ETF basically amplifies NVIDIA’s (NASDAQ:NVDA) gains by 2x. Again, this is a leveraged bet, but unlike SMST, this is a bullish 2X bet. The ETF is down due to NVIDIA taking hits from tariffs recently. NVDA stock has been falling significantly in the past couple of months due to tariff concerns and a perceived slowdown in AI progress.
NVIDIA recently reported a $5.5 billion charge. The Trump administration announced that the company will need a license to export H20 chips to China, and these restrictions could cause over $10 billion in lost revenue over the coming quarters.
Investors have been dumping NVDA stock as a result, and it is down 15.13% over the past month. It declined 2.9% so far today.
Should You Buy?
It doesn’t seem to be a good idea to buy either of the two ETFs. Both come with high expense ratios, and making leveraged bets on volatile stocks like MSTR is not a good idea. Going bullish on NVDA at these levels could look attractive, but I’d still stay careful due to how fast-moving the market is. Any new tariff announcements or export restrictions could trigger another selloff.
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