The U.S. SEC has authorized the launch of a leveraged single-stock ETF, MSTX, that targets MicroStrategy, one of the largest corporate holders of Bitcoin.
Defiance ETFs, the issuer of the new ETF, announced the launch of the product today in an official press statement.
Notably, Defiance’s single-stock products allow investors to tap into the growth of visionary companies like MicroStrategy without requiring a margin account.
Sylvia Jablonski, the CEO of Defiance, highlighted that the newly launched MicroStrategy ETF offers investors an opportunity to amplify leverage exposure to Bitcoin. In particular, MSTX aims to deliver a massive 175% of MicroStrategy’s stock’s daily return.
Notably, MicroStrategy boasts the status of the largest public firm holding BTC. At the end of Q2, MicroStrategy had acquired 226,500 Bitcoin. This large portfolio is worth $13.47 billion today and has been accumulated over the last four years at $8.38 billion.
This implies the company sits on an unrealized profit of over $5 billion in Bitcoin investments.
Interestingly, early this month, MicroStrategy disclosed its intention to raise $2 billion, of which a significant percentage would be earmarked for further Bitcoin acquisition.
MSTX to Be the Most Volatile ETF in the US Market
The introduction of MSTX represents a significant breakthrough in the ETF market. It marks the first leveraged single-stock ETFs to be approved by the SEC after years of regulatory hurdles.
It is worth noting that MSTX’s use of leverage and concentration in a single stock introduces additional risks. Bloomberg’s senior ETF analyst, Eric Balchunas, emphasized this risk in a recent commentary.
According to Balchunas, Defiance’s 1.75x leveraged Microstrategy ETF is poised to become the most volatile ETF in the US market. Balchunas suggests that Defiance may have initially aimed for a 2x leverage but was likely rebuffed by the SEC.
Despite the slightly lower leverage, MSTX is expected to pack a punch, with a volatility profile equivalent to 13 times that of the S&P 500.
Furthermore, this new ETF is set to dethrone MSOX, a 2x leveraged marijuana ETF, as the most volatile option available, marking a significant escalation in the “hot sauce arms race” among ETF providers.
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
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