Blockstream CEO criticizes the new MicroStrategy Short ETF, describing the Defiance 2X Short MSTR ETF product as "terrible

Adam Back, CEO of Blockstream, has voiced criticism against the Defiance 2X Short MSTR ETF, designed to short the shares of MicroStrategy Incorporated. Back labeled the ETF as "terrible" and expressed doubts about its effectiveness.

Bitcoin Advocate Warns of MicroStrategy ETF's Potential Pitfalls Amidst Bitcoin Correlation

Back, a prominent Bitcoin advocate, recognizes the significant correlation between Bitcoin and MicroStrategy. MicroStrategy stands as the second-largest corporate holder of Bitcoin, possessing over 210,000 BTC.

Back argues that despite the sponsors' belief in MicroStrategy's high premium, the ETF's 2x auto-rebalancing, intended to naked short MSTR, creates a highly Bitcoin-correlated asset. He warns against its potential negative impact in a volatile trading environment. Back envisions a scenario where the MSTR premium compresses while Bitcoin's price doubles, causing the ETF to be 2x short, resulting in significant losses.

MicroStrategy's Bitcoin Bet: Growth Driver or Overvalued Asset?

MicroStrategy's aggressive Bitcoin investments have fueled substantial growth in its outlook and valuation. However, concerns over its valuation being inflated have surfaced. With MicroStrategy's stock priced at $1,631 and a market capitalization of $24.42 billion, some investors perceive it as overvalued.

Despite criticism, MicroStrategy's Chairman, Michael Saylor, remains steadfast in the company's commitment to Bitcoin. Saylor emphasizes the firm's long-term perspective on Bitcoin investments, despite the risks associated with its strategy.

Adam Back raises valid concerns regarding the potential pitfalls of the MicroStrategy Short ETF, highlighting the risks posed by its auto-rebalancing mechanism. As MicroStrategy continues its Bitcoin-centric approach, the debate over its valuation and investment strategy persists.