Why Are People Still Buying MSTY While It Goes Down Like the Titanic?

In 2022, YieldMax pioneered and premiered its first of a menu of single stock covered call ETFs: an ETF tracking Tesla, ticker: TSLY. Soon, a number of others followed, including the rest of the Magnificent 7 stocks and other volatile ones, such as Strategy  Inc. (formerly MicroStrategy) (NASDAQ: MSTR).  The YieldMax MSTR Option Income Strategy ETF (NYSEARA: MSTY) is their ETF, which has garnered a sizable following due to Strategy’s unusual setup: it’s a technology stock that owns roughly $70 billion worth of Bitcoin (BTC) – worth far more than its intrinsic software business and sales. 

By tracking Strategy, holding US treasuries and a mixed long/short position of call and put options on Strategy stock to create a synthetic security, MSTY has become the YieldMax face of its single stock ETF catalog. Since launching in February 2024, MSTY has delivered an annual 196.46% return and a 336.59% cumulative return. 

However, since mid-July, MSTY has been in a tailspin, dropping from $22.96 to the $16.53 – $17.33 range at the time of this writing. Needless to say, this has caused a large segment of MSTY shareholders to go into panic mode. To the somewhat shocked surprise of the ones who are bewailing the price fall, another contingent of MSTY shareholders are doubling down and adding to their holdings, as well as touting others on social media to join in. Both sides have weighed in on their respective rationales, so the debate rages on. If the MSTY bears are basing their negativity based on technical analysis, this could be a situation where bulls using fundamental analysis and a broader and wider perspective on the situation may have an edge:

The Bigger Picture

Strategy Chairman and Founder Michael Saylor became fascinated in Bitcoin very early on and has been accumulating it for years. With 3% of the entire Bitcoin global supply, Strategy is the single largest holder of the cryptocurrency.  However, with Bitcoin in 6-figure price territory, Strategy, by virtue of its huge ownership stake, has become a Wall Street proxy stock for Bitcoin. 

By and large, current investors of Strategy almost universally own it for the Bitcoin play, and consider its intrinsic software business dismissible or irrelevant.  Strategy stock’s fortunes essentially mimic the rise and fall of Bitcoin on a proportional basis. 

MSTY is structured as an ETF to track and capture a portion of Strategy’s market movements, albeit with an upside cap due to the covered calls, whose premiums fuel the monthly dividends. Therefore, it’s less helpful to focus on news about MSTY than that of Bitcoin and Strategy. The symbiotic relationship between Bitcoin, MSTR and MSTY makes it detrimental to analyze MSTY myopically. 

Bitcoin Events

Bitcoin’s volatility has only increased as it has grown larger, although the percentage of volatility relative to total price has understandably diminished proportionately. Several recent events that can be viewed as causes for Bitcoin’s drop are seeing subsequent resolutions, thus fueling the renewed buying.

• After hitting a new high of $120,000 in July, Bitcoin has seen profit taking from several large whales. From a technical analysis POV, $100,000 is a strong support level, and additional Bitcoin ETF activity from BlackRock and other institutions indicate a bullish sentiment going through the end of 2025. Additional Bitcoin and Ethereum funds are sprouting up each month, demonstrating greater institutional Bitcoin and cryptocurrency interest in general.
• The stubborn resistance of Fed Chair Jerome Powell to enact an interest rate cut. Cointelgraph attributes $2 billion in Bitcoin outflows due to pessimism over a near term rate cut. However, Powell’s most recent admission of a possibility for rate cut in September revived Bitcoin prices this past week has given them renewed optimism.
• Concerns about monetary policy have caused some concerns re. Safety of investments against devaluation, etc. and the announced firing of Federal Reserve Governor Lisa Cook by President Trump over documented evidence of mortgage fraud violations has caused greater uncertainty for the near term. (Lower interest rates boost more speculative investments.) Speculation on potential replacement appointees from President Trump all lean towards a majority vote to cut interest rates that would override Powell’s objections.
• The Ripple legal victory over Gary Gensler’s SEC overreach lawsuit to categorize XRP as a security has given a stronger sense of legitimacy for cryptocurrencies – especially as fiat currency continues to lose value, the premise and promise of decentralized finance becomes more and more a reality. 
• The Trump Administration recently announced allowing people to invest their 401-K retirement funds into cryptocurrencies – yet another resolution of a long standing uncertainty. 
• Nathan Bachelor of Biyond projects a Bitcoin target price of $150,000 – $160,000 for the remainder of 2025. 

Strategy Events

Strategy shows no indication of flagging support behind Bitcoin, and actually has made moves to acquire more:

• Michael Saylor has instituted a revision of Strategy’s stock issuance rules to allow greater flexibility in Bitcoin acquisitions.
• Strategy will issue new MSTR stock under a market-to-asset value (mNAV) of 2.5 to fund Bitcoin purchases.
• The move was prompted because the mNAV premium that once stood at 3.4x has fallen to 1.6x.
• MSTR stock has struggled at trading around $360, amid a decline in its premium over Bitcoin and Bitcoin’s own price fall off from its July high.

Additionally, XRP attorney John E. Deaton recently predicted that Bitcoin will resume its next bull run and go to $180,000 to $250,000 in 2026, which would correspondingly cause MSTR to cross over $500 per share. Separately, Tom Lee of Fundstrat has likened MSTR to ExxonMobil, especially if Bitcoin rises as high as $1 million. He posted on X the following quote: “Exxon was oil. Strategy is Bitcoin.”

The AI Angle

Although it doesn’t get the AI acclaim of the Magnificent 7 stocks, MSTR does have an underreported, yet strong AI component to its operational model. 

Strategy has aggressively integrated AI into its business intelligence (BI) platform. Tools such as MicroStrategy Auto and Auto Express level the playing field for data access and automate workflows. These tools allow users to generate SQL queries, build dashboards, and trigger enterprise actions via natural language. By embedding AI into core business operations, MicroStrategy has assumed the role of a bridge between human expertise and machine efficiency. This facilitation of AI literacy is becoming a competitive advantage. 

Strategy’s other AI tools include Semantic Graph technology, which protects data transparency, and AI explainability features for the AI educational component. The approach is designed to break down the sense of intimidation that risk-wary companies and executives may face when encountering unfamiliar AI processes. This ergonomic aspect is expected to cultivate loyal and regular users. Making AutoExpress available as a free trial is another savvy marketing move to garner fan users.   

MSTY Specific Reasons

Investors who remain bullish on MSTY take the aforementioned rationales above into the equation and cite some of their own strategic reasons. These include:

• Assuming that MSTR has built up a considerable short position  when the large position blocks from whales were sold in July, there is a potential short squeeze scenario that could accelerate the bull run. As such, the bump in volatility will correspondingly boost option premiums and MSTY will see higher dividends, as well as a proportional upside percentage of the MSTR bull run.
• MSTY owners are experiencing considerably less downside than MSTR stock owners, thanks to the dividend income. The dividend yield has cushioned the blow, and if the bulls are correct, it will continue to pay out strongly as its ETF holders ride it back up. For example, one shareholder has noted on Reddit: “I have 1,800 shares and I’m currently 28% down ($12k) but I’ve been paid out $16k to date.”
• A contingent of MSTY investors are attracted to the dividend and are using it for dividend compounding under a DRIP program for portfolio wealth building purposes. They usually have other ETFs for capital appreciation growth. So as long as MSTY continues its dividends, they are less concerned about the stock price, as long as the ETF shows no sign of losing its viability.

When taking the cumulative news developments of Bitcoin and Strategy into account, the reasons why enthusiasm for MSTY remains strong become apparent. Although it’s certainly too risky to be the sole investment for any portfolio, it can certainly be a strategically helpful asset in a portfolio. The main income aspect, combined with the potential upside, thanks to its Strategy tracking, makes it ideal for investors who might need income during dry spells and wealth building when flush. Additionally, it offers exposure to Bitcoin gains by proxy without the need to follow the cryptocurrency industry and its particulars. 

 

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