The Securities and Exchange Commission has approved the launch of MSTX, the first leveraged single-stock ETF focused on MicroStrategy. The ETF will seek to hold 175% of from MicroStrategy Daily return of a stock.
JUST IN: 🇺🇸 SEC approves first leveraged MicroStrategy ETF. photo.twitter.com/9NYrLh81sD
— Bitcoin Magazine (@BitcoinMagazine) August 15, 2024
MSTX is issued by Defiance ETFsthat focuses on thematic and leveraged ETFs. According to Defiance CEO Sylvia Jablonski, the leveraged MicroStrategy ETF offers greater exposure to Bitcoin, as MicroStrategy is one of the largest corporate holders.
In the second quarter of 2024, MicroStrategy had approximately 226,500 Bitcoins on the balance sheet. The company took on debt to acquire most of its Bitcoin, making the stock a leveraged Bitcoin play in its own right.
Jablonski said: “Given MicroStrategy’s inherently higher beta compared to bitcoin, MSTX presents a unique opportunity for investors to maximize their leveraged exposure to the bitcoin market within an ETF wrapper.”
Leveraged ETFs pursue daily investment objectives, meaning that performance is compounded daily but varies over longer periods. MSTX carries additional risks due to the use of leverage and concentration in a single stock.
Senior ETF analyst for Bloomberg, Eric Balchunas, responded to X that a MicroStrategy leveraged ETF is “the most volatile ETF you can get in the U.S. market.”
The SEC recently allowed leveraged single-stock ETFs after years of rejecting proposals. GraniteShares and Direxion also have approval for 3x leveraged Tesla and Apple ETFs, respectively. However, leveraged equity ETFs remain a small niche, accounting for less than 1% of total ETF assets.
defiance hopes that MSTX’s Bitcoin link will help it stand out from the crowd. But the ultimate success of the first-of-its-kind ETF will depend on investor reception and MicroStrategy’s performance as a Bitcoin proxy.