The Securities and Exchange Commission has approved the launch of MSTX, the first single-share leveraged exchange-traded fund targeting MicroStrategy. The fund aims to generate 175% of the daily return of MicroStrategy shares.
BREAKING: 🇺🇸 SEC approves first long-term leveraged MicroStrategy ETF. pic.twitter.com/9NYrLh81sD
— Bitcoin Magazine (@BitcoinMagazine) August 15, 2024
MSTX is issued by Defiance ETFs.which focuses on leveraged and thematic ETFs. According to Defiance CEO Sylvia Jablonski, the MicroStrategy Leveraged ETF provides enhanced exposure to Bitcoin since MicroStrategy is one of the largest holders of Bitcoin.
As of Q2 2024, MicroStrategy held approximately 226,500 bitcoins on its balance sheet. The company borrowed most of its bitcoins, making the stock itself a bitcoin-funded investment.
“Given MicroStrategy’s inherent higher beta compared to Bitcoin, MSTX presents a unique opportunity for investors to increase their leveraged exposure to the Bitcoin market within an ETF wrapper,” Jablonski said.
Leveraged ETFs seek to achieve daily investment objectives, meaning performance is compounded daily but varies over longer periods. MSTX carries additional risks from using leverage and focusing on a single stock.
Senior ETF Analyst at Bloomberg, Eric Balchunas commented on X The MicroStrategy ETF “will be the most volatile fund you can get in the U.S. market.”
The SEC recently allowed leveraged ETFs after years of rejecting proposals. GraniteShares and Direxion also won approval for 3x leveraged ETFs for Tesla and Apple, respectively. Leveraged ETFs, however, remain a small niche, accounting for less than 1% of total ETF assets.
challenge MicroStrategy hopes MSTX will be able to outperform its competitors thanks to its connection to bitcoin. But the ultimate success of this first-of-its-kind investment fund will depend on how investors respond and MicroStrategy’s performance as a bitcoin proxy.