Leveraged ETF flows create endogenous liquidity through daily rebalancing; a stock that rises 10% then falls 10% creates a mathematical loss of 1% (volatility drag) in the underlying, but in a 2x leveraged version this loss is magnified to approximately 4% because the leverage compounds the effect (1.2 × 0.8 = 0.96 vs 1.1 × 0.9 = 0.99).