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Cryptocurrency News Articles
MicroStrategy (MSTR) Exchange-Traded Funds (ETFs) Broke $400 Million in Net Assets This Week
Sep 27, 2024 at 11:56 pm
Leveraged MicroStrategy (MSTR) exchange-traded funds (ETFs) broke $400 million in net assets this week as retail investors continue to pour into the ultra-volatile Bitcoin
Retail traders are piling into exchange-traded funds (ETFs) that offer outsized exposure to MicroStrategy (MSTR) stock, with the total net assets in the three leveraged funds now exceeding $400 million, data from Bloomberg Intelligence shows.
The ETF is designed to track MSTR’s performance with 1.75 times daily targeted exposure. It began trading on Aug. 15.
Competitors REX Shares and Tuttle Capital Management also entered the fray in September with an even more leveraged offering, kicking off what Bloomberg ETF analyst Eric Balchunas has described as the “hot sauce arms race.”
Originally a business intelligence firm, MicroStrategy transformed into a de-facto cryptocurrency hedge fund in 2020 when founder Michael Saylor started using the company’s balance sheet to buy Bitcoin.
The company’s stock price has surged in tandem with BTC’s rally this year, making MSTR a popular play for retail traders seeking exposure to crypto. However, the stock is also highly volatile, and the leveraged ETFs will amplify both the gains and losses.
The T-REX 2X Long MSTR Daily Target ETF (MSTU) and the T-REX 2X Inverse MSTR Daily Target ETF (MSTZ) aim for two-times leveraged long and short exposure to MSTR, respectively.
The ETFs clocked inflows of more than $70 million in the first week of trading, Balchunas said in a Sept. 27 post on the X platform.
“I didn’t think there was room for both (esp so quickly), it [shows] just how much ‘need for speed’ there is out there. What a country,” Balchunas added.
Leveraged ETFs typically hold financial derivatives rather than the underlying stock and are designed to be rebalanced daily to maintain a leverage target. This can lead to additional tracking error and underperformance over the long term due to the costs of daily rebalances.
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