As the bull market continues to fuel trading activity, hiccups in ETFs tracking MicroStrategy are emerging.

Retail investors are increasingly investing in ETFs that provide magnified exposure to individual stocks, which could be a warning sign for the market and the funds themselves as technical issues arise.

On Nov. 21, single stock ETFs reached a record trading volume of $17 billion, as stated by Strategas ETF strategist Todd Sohn. These funds, which have been launched by several issuers in recent years, typically track high-volatility stocks such as and .

Last week, in a note to clients, Sohn stated that the leveraged cohort accounts for only 0.4% of U.S. ETF AUM, but its trading volume has been consistently hovering around the 8-9% range recently, which is up from 4% at the beginning of the year. This growth rate is curious, given that equities trading is currently at an all-time high.

The likelihood of the volume spiking is higher during market downturns when general volatility increases, according to Sohn. The recent surge in popularity of certain investments could indicate investor euphoria, which could be a warning sign.

The surge of inflows to equity ETFs combined with hot sentiment creates a developing case, according to Sohn. However, it's important to note that year 3 of a bull market can be more challenging than the initial years following major market lows.

Daniel Sotiroff, a senior analyst at Morningstar, stated on CNBC that the increasing popularity of leveraged funds reflects a "gambling attitude" in the market and advised investors to steer clear of them.

MicroStrategy funds

Some single stock ETFs are showing signs of strain, while the broader Wall Street rally remains intact.

The issue with leveraged funds is that they are built to achieve their daily return target, but over longer periods, investors can expect leveraged long funds to fall short of their stated goal. This is due to a phenomenon known as "volatility drift."

The increasing popularity of leveraged funds for MicroStrategy has exposed a new issue: the funds are unable to accurately monitor the daily fluctuations of the crypto-linked stock.

According to FactSet data, two major leveraged long MicroStrategy funds experienced trading sessions with a return difference of more than 2 percentage points from their stated goal in the five days leading up to Thanksgiving.

The T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX) have recently turned to options to generate leverage instead of buying swap agreements from banks due to a lack of supply in the swaps market. This could make it more challenging for the funds to achieve their objectives, as confirmed by the firms behind them to CNBC.

The two funds have more than $4 billion in combined assets, according to their websites. However, the heavy demand for these funds and the high volatility of MicroStrategy itself seem to be deterring financial firms from facilitating these leveraged bets on the stock with swaps.

"At some point, every strategy reaches its limit. It can be due to market constraints or specific strategy details," Sotiroff stated.

Although recent problems persist, the popularity of single stock ETFs continues to increase. On Tuesday, Defiance introduced the Daily Target 2X Long NVO ETF (NVOX), which offers amplified exposure to the shares of an obesity drug manufacturer.