The Securities and Exchange Commission has given the green light for the launch of MSTX, the first leveraged single-stock ETF targeting MicroStrategy. This ETF, issued by Defiance ETFs, aims to deliver 175% of MicroStrategy’s stock’s daily return, offering investors amplified exposure to Bitcoin as MicroStrategy is one of the largest corporate holders of the cryptocurrency.
With MicroStrategy holding around 226,500 Bitcoin on its balance sheet as of Q2 2024, the company’s stock is already considered a leveraged Bitcoin play due to the debt it took on to acquire most of its Bitcoin holdings. Defiance CEO Sylvia Jablonski highlighted that MSTX provides a unique opportunity for investors to maximize their leverage exposure to the Bitcoin market within an ETF structure.
However, it’s important to note that leveraged ETFs like MSTX come with added risks due to the use of leverage and concentration in a single stock. Eric Balchunas, a Senior ETF Analyst for Bloomberg, pointed out that a leveraged MicroStrategy ETF will likely be the most volatile ETF in the US market.
While the SEC has recently approved other leveraged single-stock ETFs, such as 3x leveraged Tesla and Apple ETFs from GraniteShares and Direxion, respectively, leveraged equity ETFs still make up a small portion of overall ETF assets. Defiance is optimistic that MSTX’s Bitcoin link will set it apart from the competition, but the success of this first-of-its-kind ETF will ultimately depend on investor interest and MicroStrategy’s performance as a Bitcoin proxy.
