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In summary
- US investors regained their risk appetite with the rise of new ETFs leveraged on MicroStrategy shares.
- MSTX, launched in August, now has $357.6 million in assets under management, delivering leveraged results of 175%.
- Recently launched MSTU offers 200% leveraged results and already has over $80 million in assets.
US investors appear to be regaining their risk appetite, as new exchange-traded funds (ETFs) offering a leveraged position in MicroStrategy stock are booming.
MSTX, which launched in August, now has $357.6 million in assets under management. The fund aims to provide investors with daily leveraged investment results of 1.75 times (or 175%) of the daily percentage change in MicroStrategy shares.
Meanwhile, MSTU, an even riskier ETF that launched last week, offers 2x (or 200%) leveraged investing results. The product has seen huge inflows of money and now has over $80 million in assets.
The two ETFs are “long leverage” funds, meaning they hold debt to amplify their positions. Returns to investors may be greater than the asset tracked, but that also means losses can be substantial.
Bloomberg ETF analyst Eric Balchunas said on Twitter (aka X) that he didn’t think investors would want to make such risky investments, at least not at this rate. “I didn’t think there was room for both (especially so quickly),” he wrote, due to their “wilder” popularity.
Balchunas previously described such products as the ‘ghost pepper to ETF hot sauce’ due to their expected extreme levels of volatility.”
MicroStrategy is a public company that focuses on data analysis software. But in 2020, it added Bitcoin to its balance sheet as part of a strategy to earn returns for its investors.
Its shares have skyrocketed, becoming one of the best public companies listed in the US, and the company has not stopped buying the Cryptocurrency. It now owns 252,220 Bitcoin, valued at $16.6 billion, with multiple purchases announced in recent weeks.
Now, MicroStrategy has rebranded itself as a “Bitcoin development company” where investors buy shares of the company to gain exposure to the largest and oldest digital asset. Additionally, he has also explored other companies in the Bitcoin space, such as The Lightning Network, and building digital identities on the largest cryptocurrency network.
MicroStrategy’s two new stock-based ETFs are risky, but could promise big returns for investors looking for leveraged exposure to Bitcoin. In fact, when MSTX launched, the company behind the ETF, Defiance ETFs, warned investors that the fund “was not intended for use by, and is not appropriate for, investors who do not intend to actively monitor and manage their wallets.”
Edited by Andrew Hayward
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