Leveraged Betting Against Winners: The 2025 ETF Disaster So Far

Key Takeaways

• Inverse ETFs with multiple leverage factors have cratered by over 80% this year
• Positioning against gold miners and chip stocks proved catastrophic as these sectors soared
• Strategy (formerly MicroStrategy), functioning as a Bitcoin proxy, saw its leveraged funds collapse despite Bitcoin’s strong performance
• Daily rebalancing mechanisms and compounding losses have amplified investor losses beyond expectations

The Year of Sector Winners—And Inverse ETF Casualties

The U.S. equity market has delivered exceptional returns through early December 2025. The S&P 500 has climbed 16.8% year to date, while the technology-focused Nasdaq-100 surged 22.3%. However, this broad rally masks a critical reality: investors who positioned themselves against the year’s strongest performers have suffered unprecedented losses.

Exchange-traded funds (ETFs) designed to short specific stocks, sectors, or indices—particularly those amplified with leverage—have turned into value destruction machines. Here’s how spectacularly the five worst performers have failed so far.

The Gold Mining Shorting Catastrophe

Direxion Daily Junior Gold Miners Index Bear 2x Shares ETF (JDST)

Year-to-date performance: Down 89.2%

Gold has delivered one of its best years in history, surging approximately 60%. The real winners, however, have been gold mining companies, which have more than doubled in aggregate value throughout 2025. Smaller junior miners have led this charge, becoming the sector’s primary growth engine.

The JDST ETF didn’t just bet against junior gold miners—it did so with 2x inverse leverage, creating a financial instrument designed to profit from declining miner valuations. The result has been near-total evaporation of capital.

Direxion Daily Gold Miners Index Bear 2x Shares ETF (DUST)

Year-to-date performance: Down 87%

The DUST ETF follows a similar playbook but targets larger gold mining corporations. While the risk-reward profile mirrors that of junior miners with slightly reduced volatility, the outcome has been equally devastating. The daily rebalancing requirements inherent to leveraged products, combined with structural costs and sector volatility, have systematically eroded returns far beyond what a simple short position would have delivered.

The Semiconductor Shorting Blunder

Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS)

Year-to-date performance: Down 85.8%

The artificial intelligence revolution has turbocharged semiconductor demand. Chip companies, serving as foundational infrastructure for AI development, have experienced exponential growth in both orders and valuations.

Betting against semiconductors with triple leverage—the strategy embedded in the SOXS ETF—amounted to fighting one of 2025’s most powerful tailwinds. The fund has lost nearly 86% of its value while simultaneously becoming one of the market’s most volatile instruments available to retail investors.

The Cryptocurrency Pivot Reversal

Defiance Daily Target 2x Long MSTR ETF (MSTX) & T-Rex 2x Long MSTR Daily Target ETF (MSTU)

MSTX year-to-date performance: Down 82.8%

MSTU year-to-date performance: Down 82.7%

Strategy (formerly MicroStrategy) has effectively transformed itself into a concentrated Bitcoin holding company. With Bitcoin now trading near $88.92K (up 1.32% in 24 hours), the company’s massive crypto holdings initially positioned it as a crypto-bull favorite.

However, 2025 shifted the narrative. Strategy shares have declined over 45% year to date, and the two leveraged long ETFs tracking this stock—MSTX and MSTU—have compounded these losses through 2x leverage, each destroying roughly 83% of investor capital. MSTU carries a marginally lower expense ratio, providing minimal consolation to shareholders.

Why Leveraged Inverse ETFs Consistently Underperform

The structural mechanics of daily-reset leveraged products contain hidden costs. Volatility drag, compounding losses, and management expenses create a persistent headwind that simple inverse positions don’t face. When betting against sectors experiencing strong directional trends, these costs accelerate capital destruction exponentially.

The 2025 performance of these ETFs underscores a critical lesson: positioning against broad market strength through complex leveraged instruments remains one of the most punishing trades available to investors so far this year.