- MicroStrategy leveraged ETFs from Defiance, REX, and Tuttle surpass $400 million in net assets, reflecting rising retail interest.
- Defiance and REX/Tuttle launched ETFs offering 175% to 200% leveraged exposure to MicroStrategy’s Bitcoin-focused stock.
- MicroStrategy’s “Bitcoin Yield” strategy and plans to issue $700 million in debt further drive investor enthusiasm in its stock.
Leveraged MicroStrategy (MSTR) exchange-traded funds (ETFs) have soared past $400 million in net assets, driven by surging retail demand for Bitcoin-related plays. According to Bloomberg Intelligence, this milestone highlights growing interest in the ultra-volatile MSTR stock.
Originally a business intelligence firm, MicroStrategy transformed into a crypto-focused entity when founder Michael Saylor began using the company’s balance sheet to acquire Bitcoin. Asset manager Defiance ETFs launched the first leveraged MSTR ETF in August, quickly followed by REX Shares and Tuttle Capital Management in September with even more leveraged options. Bloomberg analyst Eric Balchunas dubbed this surge in product offerings the “hot sauce arms race.”
MicroStrategy’s Bold Bitcoin Strategy
MicroStrategy’s new performance metric, “Bitcoin Yield,” serves as a lodestar, aiming to finance additional Bitcoin purchases using the company’s balance sheet. In mid-September, the firm announced plans to raise $700 million in debt, partly to buy more BTC. Benchmark analyst Mark Palmer also noted the possibility of lending out Bitcoin holdings to generate yield.
These developments have fueled the rise of ETFs like Defiance’s Daily Target 1.75X Long MSTR ETF (MSTX), which provides 175% daily leveraged exposure to MicroStrategy’s stock. REX and Tuttle followed with the T-REX 2X Long MSTR ETF (MSTU) and the T-REX 2X Inverse MSTR ETF (MSTZ), targeting two-times leveraged long and short exposure, respectively.
Retail Investors Flock to High-Risk Plays
Balchunas reported that the new ETFs attracted over $70 million in inflows in just their first week of trading. He remarked on the rapid pace of inflows, noting, “It shows just how much ‘need for speed’ there is out there.”
However, leveraged ETFs come with significant risk due to daily rebalancing costs and reliance on financial derivatives rather than underlying assets. Investors seeking high returns should be cautious of the volatility these products entail.
