New Leveraged ETFs Launched For MicroStrategy Exposure

According to Cointelegraph, asset managers REX Shares and Tuttle Capital Management have jointly launched two new exchange-traded funds (ETFs) aimed at providing leveraged exposure to MicroStrategy’s (MSTR) share performance. The announcement was made on September 18. The ETFs, named T-REX 2X Long MSTR Daily Target ETF (MSTU) and T-REX 2X Inverse MSTR Daily Target ETF (MSTZ), are designed to offer 2x leveraged long and short exposure to MSTR, respectively. This launch follows the August introduction of a similar ETF by Defiance ETFs, which saw significant demand among retail investors for leveraged exposure to MSTR. Eric Balchunas, a Bloomberg Intelligence ETF analyst, commented on the potential competitive landscape, suggesting that the new ETFs could trigger a “hot sauce arms race.” Defiance ETFs had previously launched the Defiance Daily Target 1.75X Long MSTR ETF (MSTX) in August, which aims to deliver 175% exposure to MSTR’s performance. This ETF saw $22 million in trading volume on its first day, which Balchunas noted might be a record for a leveraged ETF. REX and Tuttle’s new ETFs are expected to surpass Defiance’s 1.75x MSTR ETF, which has already been successful, accumulating over $186 million in net assets. Balchunas also noted that these new ETFs could deliver volatility estimated to be about 15 times that of the S&P 500 Index (SPX). MicroStrategy, originally a business intelligence firm, has transformed into a cryptocurrency hedge fund since 2020 under the leadership of founder Michael Saylor, who began using the company’s balance sheet to purchase Bitcoin (BTC). On August 1, MicroStrategy introduced a new performance metric called “Bitcoin Yield,” aimed at leveraging its balance sheet to accumulate BTC in a manner favorable to shareholders. On September 16, the company announced plans to issue $700 million in debt, partly to buy more BTC. Leveraged ETFs, while offering significant exposure, come with additional risks due to the costs associated with daily rebalances to maintain leverage targets. These ETFs typically hold financial derivatives rather than the underlying stock. Greg King, CEO of REX Financial, the parent company of REX Shares, stated that the new ETFs provide traders with powerful tools to engage with a company that is pushing the boundaries in digital assets.