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Blockstream CEO Adam Back Criticizes MicroStrategy Short ETF as ‘Terrible Product’

Jimmy Aki
Last updated: | 2 min read
Blockstream CEO Adam Back's LinkedIn profile Picture

On April 7, Blockstream CEO Adam Back criticized the newly launched Defiance 2X Short MSTR ETF (exchange-traded fund). The ETF was created to short MicroStrategy, one of the most recognizable holders of Bitcoin.

The Blockstream CEO shared his views on an X thread, calling the ETF a “terrible product” unlikely to yield the desired results.

Blockstream CEO Claims it’s Risky to Short MSTR


He reasoned that even if investors considered MicroStrategy overvalued, the ETF would still face great risk due to auto-rebalancing in a volatile market.

“Even if MSTR premium compressed but BTC price doubles, you’re 2x short!” he said. “Price will overwhelm NAV correction, so you’ll get rekt anyway. and auto-rebalancing volatile underlying assets erodes capital to slippage in sideways chop FAST. And MSTR is bitcoin correlated and volatile!”

Per an SEC press release, the Defiance ETF proposed on March 7 was filed under the TIDAL TRUST II financial group. The ETF seeks to profit from potential declines in MicroStrategy’s (MSTR) stock price by taking a leveraged short position (-200%) against the company’s shares.

Back cited MicroStrategy’s massive Bitcoin holdings as a key reason why he sees the idea of a short ETF as a weak strategy. MicroStrategy currently boasts a portfolio of over 210,000 BTC, worth around $15.2 billion representing over 1% of the total Bitcoin supply that will ever exist.

With MicroStrategy’s valuation now heavily tied to its rising Bitcoin investments, Back believes the ETF’s 2x auto-rebalancing mechanism to maintain a short exposure could prove disastrous.

Michael Saylor Defiant Despite Mounting Criticism on MSTR ETF


Before Back’s warnings, popular short seller Kerrisdale Capital announced last month that it would short MicroStrategy and long Bitcoin. The hedge fund stated that investors no longer needed MicroStrategy to access Bitcoin, and as such, they saw no reason to “justify paying well over double for the same coin,” especially with increasing access to Bitcoin through brokerages, exchanges, and ETFs.

While MicroStrategy’s CEO Michael Saylor continues to face criticism over his Bitcoin acquisition strategy, he reaffirmed that holding BTC is part of the company’s long-term commitment. At a Bloomberg event earlier this year, Saylor articulated his bullish stance on Bitcoin, asserting its technical superiority over competitors, including those with higher market capitalization.

“Bitcoin is technically superior to those asset classes,” he explained. “And that being the case, there’s just no reason to sell the winner to buy the losers.”