MicroStrategy leveraged ETF passes $400 million in net assets

MicroStrategy's (MSTR) leveraged exchange traded funds (ETFs) topped $400 million in net assets this week, as retail investors continue to flock to high-volatility Bitcoin (BTC) investments, according to reports. Data from Bloomberg Intelligence.

Asset manager Defiance ETFs launched its first leveraged MSTR ETF in August, while rivals REX Shares and Tuttle Capital Management launched more leveraged offerings in September, in what Bloomberg ETF analyst Eric Balchunas called a ‘hot sauce arms race. hot sauce arms race.

MicroStrategy transformed into a de facto cryptocurrency hedge fund in 2020, and founder Michael Saylor began buying Bitcoin with company assets.

On 1 August, MicroStrategy adopted ‘Bitcoin Yield’ as a new performance metric for the company, aiming to use its balance sheet to raise more Bitcoin at a lower cost for the benefit of MSTR shareholders.

On 16 September, MicroStrategy announced plans to issue $700 million in debt, partly to buy more BTC, and Benchmark equity analyst Mark Palmer said the company could also start lending some of its Bitcoin holdings to generate revenue.

On 15 August, Defiance ETFs launched the Defiance Daily Target 1.75X Long MSTR ETF (MSTX), offering 175% leveraged long daily target exposure to MSTR performance.

On 18 September, REX Shares and Tuttle Capital Management launched two ETFs, the T-REX 2X Long MSTR Daily Target ETF (MSTU) and the T-REX 2X Inverse MSTR Daily Target ETF (MSTZ), which offer a double leveraged long position in MSTR. twice the leveraged long and short exposure to MSTR.

These ETFs attracted more than $70 million in inflows in their first week of trading, Balchunas said in a 27 September post on the X-platform.

Leveraged ETFs add additional risk to MSTR, typically underperform due to daily rebalancing costs and often hold financial derivatives rather than underlying stocks.