MicroStrategy’s new exchange-traded fund (ETF), MSTX, has been given the go-ahead from the U.S. Securities and Exchange Commission (SEC).
This ETF, managed by Defiance ETFs, aims to deliver 175% of MicroStrategy’s daily stock return. It is the first of its kind to focus on just one stock, specifically MicroStrategy, which is known for holding a large amount of Bitcoin.
Defiance ETFs, which handles thematic and leveraged ETFs, is behind MicroStrategy’s new exchange-traded fund. The fund offers a way for investors to gain more exposure to Bitcoin, given the substantial Bitcoin reserves that MicroStrategy holds. Sylvia Jablonski, the CEO of Defiance ETFs, highlighted that since MicroStrategy’s stock is often more volatile than Bitcoin, MicroStrategy’s new exchange-traded fund gives a chance to increase leverage in the Bitcoin market through a standard ETF.
By the second quarter of 2024, MicroStrategy had around 226,500 Bitcoin, making this ETF a way for investors to indirectly invest in the unpredictable Bitcoin market through a regular financial product. However, leveraged ETFs like MSTX carry higher risks. MSTX aims to deliver 175% of MicroStrategy’s daily stock return, which is closely tied to the price of Bitcoin. But because the ETF uses leverage, its returns can vary a lot over time.
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More About MSTX
Since MSTX focuses on one stock and uses leverage, it could be very volatile. Eric Balchunas, a Senior ETF Analyst at Bloomberg, mentioned that MSTX might become one of the most volatile ETFs in the U.S. market due to these factors.
The SEC’s approval of MicroStrategy’s new exchange-traded fund also shows a change in its approach to leveraged single-stock ETFs. After many years of rejecting similar products, the SEC has recently approved several, including those related to companies like Tesla and Apple. While leveraged equity ETFs are still a small part of the market, making up less than 1% of all ETF assets, MSTX’s focus could draw more interest.
Defiance ETFs is promoting MicroStrategy’s new exchange-traded fund as a product that leverages MicroStrategy’s Bitcoin holdings to offer more exposure to the cryptocurrency market. But the ETF’s success will depend on how much interest it generates among investors.
Michael Saylor, the Chairman of MicroStrategy, personally owns over $1 billion in Bitcoin, showing his strong belief in the cryptocurrency. The large Bitcoin holdings of both Saylor and MicroStrategy make MSTX more appealing, as it offers a leveraged way to invest in Bitcoin through a regulated financial product.
At the moment, MicroStrategy’s stock is priced at $135.38, up 2.98% in the last 24 hours, with a trading volume of $8,104,347.
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