SEC Greenlights Crypto-Linked Leveraged MicroStrategy ETF

On Aug 15, 2024

The SEC has allowed the listing of MSTX, a new leveraged ETF focused on MicroStrategy, which has significant exposure to Bitcoin. This ETF, provided by Defiance ETFs, seeks to provide 175% leverage to MicroStrategy’s daily stock return. It presents a significant opportunity for investors interested in the cryptocurrency market through traditional equity investments.

SEC Approves Leveraged MicroStrategy Bitcoin ETF

MSTX further enhances the investment opportunity by using MicroStrategy’s daily stock volatility. MicroStrategy, headed by Michael Saylor, has about 226,500 BTCs in its portfolio, thus being one of the largest corporate Bitcoin holders. Using debt to finance Bitcoin purchases increases the company’s stock’s leverage. Therefore, MSTX offers investors a straightforward way to gain leveraged exposure to the economic activity related to Bitcoin.

Sylvia Jablonski, CEO of Defiance ETFs, explained the strategic value of MSTX. ”MicroStrategy’s higher beta than Bitcoin itself is a potential advantage for ETF investors,” she said. This ETF is ideal for those who want to increase their exposure to the cryptocurrency market using a regulated product. With a management fee of 1.29%, the fund checks the high-risk, high-reward nature of the leveraged ETFs despite the high-risk nature.

MSTX ETF Brings New Volatility to Market

The arrival of MSTX may create new trends in the ETF market. In the words of Eric Balchunas, Senior ETF Analyst at Bloomberg, MSTX could be “the most volatile ETF available in the U.S. market.” This volatility may appeal to investors willing to take a risk in high-volatility markets and thus expand their market share. Nonetheless, the inherent dangers may also discourage more risk-averse investors.

Defiance launching 1.75x Microstrategy ETF $MSTX tmrw which, even tho it’s ‘only’ 1.75x (they prob tried 2x but SEC pushed back) it will be the most volatile ETF you can get in US market (equiv to 13x SPY) edging out $MSOX (2x weed), a big step in the hot sauce arms race. pic.twitter.com/APcfJt8O7T
— Eric Balchunas (@EricBalchunas) August 14, 2024

The effectiveness of MSTX is directly tied to MicroStrategy’s ability to act as a Bitcoin proxy. Since the cryptocurrency market is volatile similarly, the interest in MSTX will vary among investors. The success of the ETF will largely depend on MicroStrategy’s market strategies and the investors’ interest in similar investment products. Only time will tell how MSTX will do in a market that has only recently started accepting leveraged single-stock ETFs.