[NEWS] Leveraged MicroStrategy ETF, MSTX

The U.S. Securities and Exchange Commission (SEC) has approved the launch of MSTX, the first leveraged single-stock ETF targeting MicroStrategy.

MSTX aims to achieve 175% of the daily return of MicroStrategy shares.

MSTX will be issued by Defiance ETFs, which focuses on thematic and leveraged ETFs.

According to Definance CEO Sylvia Jablonski, MicroStrategy is the largest holder of Bitcoin (BTC), and the leveraged MicroStrategy ETF will increase exposure to Bitcoin.

Purchasing the MicroStrategy ETF will allow you to invest in Bitcoin. Previously, former MicroStrategy CEO Michael Saylor said, "If you want to invest in Bitcoin, you should invest in MicroStrategy."

As of the second quarter of 2024, MicroStrategy's balance sheet lists it as holding approximately 226,500 BTC.

The company has taken on debt to acquire most of its Bitcoin, and the stock itself is a leveraged Bitcoin trade.

Jablonski said,

"MicroStrategy has an inherently higher beta relative to Bitcoin, so MSTX offers investors a unique opportunity to maximize leveraged exposure to the Bitcoin market in an ETF."

Leveraged ETFs pursue daily investment objectives, meaning performance is amplified from day to day but fluctuates over the long term.

MSTX carries additional risks due to its use of leverage and concentration in a single stock.

Becoming the most volatile ETF

In a post on X, Eric Balchunas, senior ETF analyst at Bloomberg, said that while this is only 1.75x (they probably tried to make it 2x, but the SEC objected), "it would be the most volatile ETF available in the U.S. market (equivalent to 13x SPY), beating $MSOX (2x weed) and a big step in the hot sauce arms race."

After rejecting a proposal for years, the SEC recently allowed a leveraged single-stock ETF.

GraniteShares and Direxion also approved a 3x leveraged Tesla ETF and Apple ETF, respectively.

However, leveraged stock ETFs remain a small niche product, accounting for less than 1% of total ETF assets.

Definance hopes that MSTX's work with Bitcoin will set it apart from the pack.

However, the ultimate success of this first ETF will depend on investor reaction and the performance of MicroStrategy, which holds a large amount of Bitcoin. However, MSTX is expected to perform significantly better or worse depending on the price of Bitcoin. This means that it is likely to be a highly volatile product, which is rare for an ETF.

Definance is a major ETF issuer founded in 2018 that specializes in income and thematic investing. The company is also a pioneer of leveraged ETFs designed for traders looking for strategic opportunities.

Reference: Definance announcement

Image: Shutterstock

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