On August 15, exchange-traded fund issuer Defiance ETFs announced the launch of MSTX, MicroStrategy’s first-ever leveraged single-stock ETF. This development followed approval from the US Securities and Exchange Commission (SEC).
Designed to provide 175% long daily exposure to MicroStrategy’s stock, MSTX offers investors amplified access to the company’s performance, closely tied to Bitcoin’s volatility.
MicroStrategy’s Bitcoin Strategy Drives ETF Interest
MicroStrategy is a Virginia-based software company famous for its aggressive Bitcoin acquisition strategy. As of Q2 2024, the company holds 226,500 BTC, making it the largest public company holder of Bitcoins. The company’s stock has effectively become a proxy for Bitcoin, attracting investors looking for leveraged exposure to the digital asset without directly holding it.
MSTX targets sophisticated investors who actively manage their portfolios. It offers the potential for significant gains by amplifying MicroStrategy’s stock’s daily performance.
“Given MicroStrategy’s inherent higher beta compared to Bitcoin, MSTX offers a unique opportunity for investors to maximize their leverage exposure to the Bitcoin market within an ETF wrapper,” Sylvia Jablonski, CEO of Defiance ETFs, stated.
Read more: Who Owns the Most Bitcoin in 2024?
Leveraged ETFs, like MSTX, aim to multiply an underlying asset’s daily returns. For instance, if MicroStrategy’s stock rises 5% in a day, a 1.75x leveraged ETF would target for an 8.75% increase.
However, leverage recalculation happens on a daily basis. Such a mechanism means the returns can vary over longer periods due to the effects of compounding. Furthermore, this daily reset can lead to performance that differs from what investors might expect over time.
Therefore, Defiance emphasizes that MSTX is most appropriate for experienced investors who fully understand these risks and are prepared to monitor their investments closely.
Market analysts have cautiously welcomed MSTX, acknowledging its potential appeal to a niche market. Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, described MSTX as one of the most volatile ETFs on the market, with performance metrics equivalent to 13 times that of the S&P 500 ETF (SPY).
He also noted that “Defiance beat Tuttle to market with this,” referring to Tuttle and REX Financial’s (T-Rex) plan to launch a similar ETF. Earlier in June, T-Rex filed with the SEC for the T-Rex 2X Long MSTR Daily Target ETF. This fund seeks to double the daily performance of MicroStrategy.
MicroStrategy’s stock has seen remarkable growth since the company began regularly purchasing Bitcoin in August 2020. Initially trading at around $14, MSTR quickly surged past the $100 mark by February 2021, reflecting an impressive 605% increase in just six months.
Read more: 5 Best Web3 Stocks To Invest in 2024
As of 20:00 ET in after-hours trading, MSTR is priced at $131.93. This figure represents a 1.2% gain over the last 24 hours and a 92.49% increase year-to-date.
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