Retail investors who chased Michael Saylor’sBitcoinvision are now confronting heavy losses, as the turmoil around Strategy Inc.’s stock intensifies and leveraged products tied to it unwind sharply. The rout has erased gains built during the crypto mania and left funds tracking the company’s volatile bets struggling to retain assets. The developments were reported by Bloomberg.Strategy — once seen as a simple route to hold Bitcoin through a listed stock — has dived more than 60% from recent highs. The company said on Monday that it had created a $1.4 billion reserve to manage dividend and interest payouts, a step meant to ease concerns it might be forced to sell Bitcoin if prices fall further.Leveraged bets unravelFor many investors, that reassurance came too late. MSTX and MSTU, two funds offering double the daily return on Strategy’s stock, have each fallen more than 80% this year, placing them among the 10 worst performers in a US ETF universe of more than 4,700 products. A third fund, MSTP, launched in June, has dropped by a similar amount. Together, the trio has shed about $1.5 billion in assets since early October.Retail interest had originally surged when firms such as Defiance and Tuttle Capital Management rolled out these high-octane products to mirror one of Wall Street’s most visible Bitcoin-proxy trades.Strategy shares slid 34% in November. Bitcoin, down roughly 30% from its October peak, trades near $87,000, while the stock closed Monday 3.3% lower after falling as much as 12% during the day. Bitcoin advanced 0.5% as of 6.20am in London on Tuesday.“The recent pullback in Bitcoin has hit Strategy’s stock hard, and 2x leveraged plays like MSTX and MSTU turn that into even larger losses,” said Roxanna Islam, head of sector and industry research at ETF shop TMX VettaFi.“It’s a reminder that leveraged single-stock ETFs can look great on the way up, but can erase gains very quickly when the underlying trade goes the other way.”Defiance declined to comment. Tuttle Capital and GraniteShares, which is behind MSTP, did not immediately respond to requests for comment.Funding strain and index threatAt the centre of the market’s worries is mNAV, a metric comparing Strategy’s enterprise value with its Bitcoin holdings.The premium embedded in that ratio has largely evaporated, pulling it to about 1.15, a level executives have described as a caution zone. CEO Phong Le said on a podcast that slipping below 1.0 could force the firm to sell Bitcoin to meet payout obligations, though only as a last resort.The new reserve, financed through recent equity sales, covers at least 21 months of dividend and interest payments. But it has not quelled concerns over Strategy’s dependence on leverage, its reliance on retail flows, and the strain on its capital model.To keep buying Bitcoin, Strategy has repeatedly issued common stock — a move that dilutes existing shareholders. With its valuation premium narrowing, the company has shifted towards preferred shares and other costlier capital to sustain its crypto strategy.The ETF ecosystem linked to Strategy is also struggling. At least 15 products tied to the stock are currently trading, many down double digits this year. Combined assets for MSTX, MSTU and MSTP have fallen from more than $2.3 billion in early October to about $830 million, Bloomberg data show.The broader crypto slump — despite increased institutional participation and political support from the Trump White House — has dragged down miners, altcoins and firms with token-heavy treasuries. Leveraged ETFs, popular with at-home traders earlier this year, are among the hardest hit.These funds aim to deliver double Strategy’s daily move. In volatile markets, compounding returns — known as volatility decay — can steadily erode performance even if the underlying stock ends flat.When Strategy’s shares dropped and whipsawed, the ETFs amplified the losses.“Leveraged ETFs are generally a dangerous investment. A leveraged ETF on shares of a stock that levers up to buy a highly speculative asset is a risk profile of its own,” said Michael O’Rourke, chief market strategist at Jonestrading.Strategy may now face removal from key benchmarks. Analysts at JPMorgan warned that the stock could be excluded from indices such as the MSCI USA and the Nasdaq 100, a shift that could unleash billions in passive outflows. The reversal is striking for a firm once viewed as a potential S&P 500 entrant.