Summary YieldMax MSTR Option Income Strategy ETF (MSTY) is now a strong sell due to ongoing Bitcoin weakness and MSTY's structural underperformance. BTC and major altcoin dominance declines, coupled with stablecoin inflows, signal a risk-off phase and likely further crypto drawdowns. MSTY's options strategy has failed to outperform MSTR, on a total returns basis, raising questions about MSTY's value addition through its options sleeve. Distributions are primarily realized capital gains, not true income, diminishing MSTY's appeal versus simply holding the benchmark. This is my third thesis on the YieldMax MSTR Option Income Strategy ETF ( MSTY ), with which I aim to argue that this ETF is now a ‘strong sell.’ Primarily because its benchmark asset, Strategy ( MSTR ), will continue the downward trajectory that commenced in October of this year. A slide that has been and will be driven by Bitcoin’s ( BTC-USD ) depreciation – the underlying driver of MSTR’s stock price, and thus MSTY’s total return. Moreover, I’ll argue that MSTY is not a great ETF to own, irrespective of MSTR’s or BTC’s projected price path. Precisely speaking, I’ll reason that MSTY’s income generation mechanism, i.e., its options trading strategy, hasn’t performed well enough to justify owning, now or in the future. What is MSTY? This section is a general introduction to MSTY. Those who have a good understanding of basics of the ETF, such as its objective, options strategy, returns, and risk, can skip this section. According to MSTY’s prospectus : The Fund’s primary investment objective is to seek current income. The Fund’s secondary investment objective is to seek exposure to the share price of the common stock of MicroStrategy Incorporated d/b/a Strategy (“MSTR” or “Underlying Security”), subject to a limit on potential investment gains. Management aims to achieve its income goal by buying and selling MSTR options, and its capital appreciation objectives by pursuing a synthetic long exposure to MSTR. I consider MSTY’s options approach multi-faceted because it employs credit spreads , in addition to covered calls, to extract income from premiums. The fund’s website reports its distribution rate as 100.69%, and according to Seeking Alpha, its TTM yield stands at 262.97%. Last but not least, MSTY currently has $1.67B in AUM, and a standard deviation of 53.38%. MSTY's expense ratio is 0.99%, on the higher side for an actively managed ETF, according to Investopedia , which advocates that a reasonable expense ratio for an actively managed fund is somewhere between 0.5% and 0.75%. Furthermore, before concluding this article, I'll prove that holding MTSY is akin to selling MSTR shares for income, implying that there's no real added benefit associated with paying that management fee. Dominance Changes A robust indicator, or rather indicators, that I utilized in my previous thesis were dominance charts for BTC, Ethereum ( ETH-USD ), and Ripple ( XRP-USD ) Those familiar with dominance charts and the funds rotation that occurs among cryptos would have guess that my argument rested on the fact that numbers at that time were indicating the start of the alt season. I’d asserted that once the altcoins are done playing catchup, BTC’s dominance would return, and cause the coin to reach a target of $250K. For the remainder of this section, I’ll further investigate dominance changes since the publication of my last article to conclude that crypto investors have entered a risk-off phase. Or as the infamous saying among digital coin aficionados goes – “ a crypto winter has begun. ” Below is the daily YTD dominance chart for BTC, which shows BTC’s dominance reached a peak of roughly 60% in November and has since deteriorated with dominance currently at approximately 58%. Bitcoin (BTC) Dominance Chart (TradingView) In and of itself, that fall does not mean anything because dominance is a relative comparison metric. That is to say, investors should also analyze the dominance charts of ETH, here , and XRP, here, to understand whether investors are moving out of BTC and into alt coins. A phenomenon that doesn’t seem to be occurring based on a high-level analysis of ETH and XRP charts, both of which indicate dominance deteriorations. Numerically, ETH’s dominance has reduced from a high of 13.01% on December 10, 2025, to 12.13% as of December 17, 2025. And XRP’s dominance has decreased from 4.03% as of December 13, 2025, to 3.96% as reported on December 17, 2025. Such a tandem decrease in dominance for BTC and major altcoins suggests that money is exiting the crypto world due to a risk-off sentiment. My hypothesis gains further credibility when one analyzes dominance charts of stablecoins such as Tether USD ( USDT-USD ) and USCoin USD ( USDC-USD ) linked here and here , respectively. For both those stablecoins, dominance has demonstrated a strong upward trend since November. Tether (USDT) Dominance Chart (TradingView) Precisely speaking, USDT has shot up from 5.16% on the 10th of November 2025 to 6.39%, while USDC’s dominance currently stands at 2.69%, a more than 0.5% increase from a value of 2.14% on November 10, 2025. It’s important to understand that stablecoins are pegged against the US dollar, implying that they are just another form of cash. When crypto investors are moving into cash instead of holding BTC, it's because they don’t believe that BTC or other cryptos will rally in the future. In the absence of expectations, investors would, incrementally, continue exiting their positions to book profits, thus causing prices to decline further, a self-fulfilling prophecy. Unextraordinary Performance Henceforth, I’ll provide reasons why MTSY is not a good investment, irrespective of whether BTC is in a bear or bull phase. I’m not a big fan of covered-call ETFs, not because of some inexplicable feeling, but because of their structural inability to generate returns higher than their respective benchmark. Such a structural limitation stems from the fact that call options limit upside in a bull run, but don’t provide enough income to offset the opportunity cost losses incurred due to that capped upside. Stated differently, on a total return basis, covered-call ETFs usually tend to underperform their underlying asset. In fact, for all the ETFs in this category that I’ve covered in this past year, none have managed to outperform their benchmark asset/index. Even still, I was willing to give MSTY the benefit of the doubt due to its multipronged options strategy; unfortunately, its performance has been underwhelming. On a total return basis, MSTY has delivered 56.88% since its inception in February 2024, whereas MSTR has returned 58.46% for the same period. Admittedly, a sub-2% difference isn’t catastrophic, but does make one wonder how is owning MSTY any different from just owning MSTR and selling its shares? MSTY vs MSTR - Total Returns (Morningstar) Indeed, it can be said that MSTY’s management is doing exactly that - selling capital gains from their synthetic exposure to MSRT. Below is the fund’s Statement of Changes in Net Assets, as presented on page 56 of its annual financial statements . Statement of Changes in Net Assets (MSTY's Annual Financial Statements) According to that statement, MSTY distributed $247,274,410 to its shareholders for the period ending October 31, 2023. For the same period, it generated only $3,758,992 in net investment income, $290,278,624 in net realized gain, and incurred a loss of $32,718,175 unrealized appreciation/depreciation of assets. Based on those numbers, its clear that distribution to shareholders are primarily comprised of realized capital gain. In percentage terms, income accounted for only 1.52% of total distributions. Given that MSTY has underperformed MSTR on a total-returns basis, it's safe to say that investors would have been better off holding MSTR and selling its shares instead of depending on MSTY for income. MSTY proponents, at this juncture, would be well within their rights to argue that the distribution numbers presented on MSTY’s website portray a completely different story. For convenience, I added all the distributions reported on the website and calculated the split between ROC (37.06%) and income (62.94%). MSTY's Total Distributions Composition Since Inception (Author's Work (Data from MSTY's Webpage)) Please note that when funds report distributions breakdown on documents outside of financial statements, such as Section 19-a notices, they are allowed to report “estimates” of income, as discussed in my article on the Virtus InfraCap U.S. Preferred Stock ETF ( PFFA ). Those distributions, therefore, could very well comprise capital gains, and MSTY would be allowed to classify them as “income” because it’s only an estimate. Thus, to determine a fund’s true distribution composition, investors should always analyze its financial statements. Closing Thoughts One of the primary risk to my thesis is the possibility of a favorable regulatory change that would provide renewed tailwinds for Bitcoin, and consequently MSTR/MSTY. But asserting whether something in that domain can or cannot happen would fall in the realm of speculation. However, if you possess meaningful reasons to believe that a positive development can cause BTC to rally in the coming months, you may continue to stay invested in MSTY. Furthermore, you may not be bothered by the fact that MSTY has underperformed MSTR on a total returns basis, and the fact that its distributions are comprises mostly capital gains, then once again, you may continue to hold this ETF. Personally, I’d be hard-pressed to recommend a ‘buy’ or ‘hold’ for MSTY in 2026, and possibly beyond, unless the management makes material changes in the fund’s options trading strategy and/or there are significant quantifiable trends indicating an imminent BTC rally. Finally, I’d like to mention that dominance charts are one of the many indicators that point towards BTC drawdowns in the future. I’ll write about all those other indicators soon, stay tuned!
