The ETF might provide more leveraged exposure to Bitcoin, particularly for institutional investors trying to diversify their holdings.
The first Bitcoin-related leveraged exchange-traded fund (ETF) has launched in the United States, marking a significant milestone in institutional cryptocurrency adoption.
The new leveraged MicroStrategy ETF, MSTX, aims to provide 175% long daily exposure to MicroStrategy.
Sylvia Jablonski, CEO of Defiance ETFs, highlighted the ETF’s role in enhancing leverage exposure to Bitcoin:
“We’re amplifying the potential for investors seeking long-leveraged exposure to Bitcoin. 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.”
ETFs can significantly impact cryptocurrency prices, with ETFs contributing to approximately 75% of new Bitcoin investments by February 15, as Bitcoin surpassed the $50,000 mark.
MicroStrategy’s Performance
MicroStrategy is one of the first publicly traded companies to add Bitcoin to its balance sheet.
According to Michael Saylor, the company’s founder, MicroStrategy has outperformed 99% of firms in the S&P 500 index. On August 11, Saylor tweeted:
“Four years ago today, MicroStrategy adopted #Bitcoin as its primary treasury reserve asset; since then $MSTR has outperformed 499 of 500 stocks in the S&P 500.”
The new leveraged ETF may attract significant investor interest, given that MicroStrategy’s stock has recently outperformed Bitcoin.
Over the past six months, MicroStrategy shares have risen more than 70%, while Bitcoin’s price has increased by only 13%, according to Bitstamp data.
MSTX ETF is Targeting “sophisticated investors”
Given the high-risk nature of leveraged investments, the ETF is intended for more sophisticated investors than retail ones. Defiance’s announcement specified:
“The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies.”
Eric Balchunas, a senior ETF analyst at Bloomberg, noted on August 14 that the MSTX ETF could become the most volatile ETF in the US market, stating:
“It will be the most volatile ETF you can get in the US market (equiv to 13x SPY) edging out $MSOX (2x weed), a big step in the hot sauce arms race.”
