Key Takeaways

Strategy Shares' Nasdaq 7HANDL Index ETF (HNDL), which holds a significant allocation to bitcoin futures via the ProShares Bitcoin Strategy ETF (BITO), has recorded its first six-month consecutive decline since adopting its bitcoin-linked strategy in 2020. This persistent downturn, highlighted by crypto analyst Chris Millas, marks a stark departure from the fund's historical performance patterns, which typically saw swift recoveries following drawdowns. The slump persists despite the fund's continued accumulation of bitcoin exposure, presenting a unique conundrum for investors and signaling a potential shift in the market dynamics for crypto-correlated equity products.

An Unprecedented Drawdown Pattern

Since its strategic pivot in late 2020 to include a substantial allocation to bitcoin futures—primarily accessed through BITO—the Strategy Shares HNDL ETF had become a bellwether for institutional-adjacent crypto exposure within a multi-asset income framework. Its performance was characterized by high volatility but also by robust, V-shaped recoveries. Drawdowns were sharp but short-lived, often reversed within a quarter as bitcoin's price momentum surged.

The current six-month losing streak shatters that precedent. Analyst Chris Millas points out that this extended decline is "unusually persistent" and "breaks with past drawdown patterns." This isn't merely a reflection of bitcoin's price action over the period, which has seen its own significant corrections and consolidations, but suggests a deeper, more structural pressure on the fund's model. The "buy-the-dip" mechanism that previously fueled rapid rebounds for HNDL appears to be faltering, even as the fund's strategy mechanically maintains or increases its bitcoin-linked holdings.

Dissecting the Underlying Pressures

Several converging factors explain this paradigm shift. First, the macroeconomic landscape has transformed dramatically since 2021. Aggressive interest rate hikes by the Federal Reserve have increased the opportunity cost of holding non-yielding assets like bitcoin and have pressured the broader equity components within HNDL's portfolio. The "TINA" (There Is No Alternative) narrative that propelled capital into risk assets has been replaced by a "TARA" (There Are Reasonable Alternatives) environment, with treasury yields offering compelling competition.

Second, the market structure for bitcoin exposure has evolved. In 2024, investors have direct access to spot bitcoin ETFs, which offer a cleaner, often more cost-effective, and less contango-prone exposure than the futures-based strategy employed by BITO and, by extension, HNDL. This has likely led to a migration of capital away from synthetic or futures-based products, creating a persistent headwind for HNDL's key holding.

Third, the income-generating components of the HNDL ETF—which include covered call strategies and other yield-focused equities—have faced their own challenges in a high-rate, uncertain growth environment, compounding the drag from the crypto allocation.

What This Means for Traders

For active traders and portfolio managers, this extended slump is a critical data point with several actionable implications:

  • Re-evaluate Futures-Based vs. Spot BTC Exposure: The chronic underperformance highlights the structural drawbacks of futures-based ETFs (like BITO) in a prolonged bear or sideways market, primarily due to roll costs (contango). Traders seeking bitcoin beta should scrutinize the growing performance gap between futures and spot ETFs.
  • Monitor for Mean Reversion or Breakdown: A six-month trend represents a significant momentum signal. Traders should watch key technical levels on HNDL. A failure to break the losing streak could trigger further outflows and technical selling, while a reversal could be explosive if bitcoin sentiment turns decisively positive.
  • Assess Broader Crypto Correlation Thesis: HNDL's streak tests the hypothesis that diversified funds with crypto allocations provide uncorrelated returns. Its sustained decline alongside traditional risk-off periods suggests correlation may be increasing during downturns, a crucial risk management consideration.
  • Consider the Contrarian Play: The extreme persistence of the sell-off, coupled with continued accumulation noted by Millas, sets up a potential contrarian opportunity. If bitcoin enters a strong bullish phase, HNDL could see a leveraged rebound due to its depressed baseline. However, this is a high-risk, timing-dependent strategy.

The Accumulation Paradox

Chris Millas's observation that the slump continues "even as the firm continued accumulating bitcoin" is the core paradox. This indicates the strategy is operating mechanically, averaging down its position. For traders, this represents both a potential source of future buying pressure if the strategy persists and a warning about automated systems that may not account for shifting market regimes. It raises the question: is this disciplined accumulation building value for a future rally, or is it simply catching a falling knife?

A Forward-Looking Conclusion: A Test of Strategy in a New Regime

The six-month losing streak for Strategy Shares HNDL is more than a statistical anomaly; it is a stress test for a popular investment model from the previous crypto cycle. It underscores that strategies born in the era of zero interest rates and limited spot access must now prove their resilience in a world of higher yields and more efficient crypto ETFs.

The coming months will be telling. A recovery in bitcoin price above key resistance levels, coupled with a stabilizing macro environment, could validate HNDL's accumulation strategy and catalyze a significant reversal. Conversely, a continuation of the streak would signal a fundamental impairment of the fund's value proposition, likely leading to further investor reassessment. For the market, HNDL's performance serves as a live case study on the evolving integration of cryptocurrency into structured investment products—a integration that is proving far more complex in practice than in theory. Traders would be wise to watch this ETF not just for its returns, but for the critical lessons it provides about the maturation and ongoing volatility of the crypto-asset class within traditional finance frameworks.