Breaking: MicroStrategy ETF Receives SEC Green Light for Leveraged Bitcoin Exposure

MicroStrategy ETF targeting Bitcoin exposure has received approval from the Securities and Exchange Commission (SEC). The ETF, known as MSTX, is issued by Defiance ETFs and is designed to deliver 175% of MicroStrategy’s daily stock return.

MicroStrategy ETF Receives Green Light

According to an announcement, the MicroStrategy ETF has officially been approved by the SEC. This approval marks a step in the financial markets, as MSTX becomes the first leveraged single-stock ETF focused on MicroStrategy, a company known for its substantial Bitcoin holdings. 

Defiance ETFs, the issuer of MSTX, is known for its focus on thematic and leveraged ETFs. MSTX is expected to offer investors amplified exposure to Bitcoin due to MicroStrategy’s substantial Bitcoin reserves.

Defiance ETFs’ CEO, Sylvia Jablonski, emphasized the unique opportunity MSTX provides for investors. “Given MicroStrategy’s inherent higher beta compared to Bitcoin, MSTX offers a unique opportunity for investors to maximize their leverage exposure to the Bitcoin market within an ETF wrapper,” Jablonski stated. 

With the company holding approximately 226,500 Bitcoin as of Q2 2024, the ETF allows investors to indirectly tap into the volatile Bitcoin market through a traditional financial product.

Leveraged ETFs: High Reward, High Risk

MSTX and other leveraged ETFs are intended to provide a multiple of the percentage daily investment returns. The MicroStrategy ETF seeks to achieve 175% of the daily return of the firm’s stock, which is closely linked with the price of Bitcoin. However, since these ETFs use leverage the returns can differ over the longer time horizon.

The leveraged nature of the MicroStrategy ETF due to its structure and concentration in one stock also contributes to the risk. As pointed out by Eric Balchunas, Senior ETF Analyst at Bloomberg, MSTX may turn out to be one of the most volatile ETFs in the U. S. market.

Defiance launching 1.75x Microstrategy ETF $MSTX tmrw which, even tho it's 'only' 1.75x (they prob tried 2x but SEC pushed back) it will be the most volatile ETF you can get in US market (equiv to 13x SPY) edging out $MSOX (2x weed), a big step in the hot sauce arms race. pic.twitter.com/APcfJt8O7T

— Eric Balchunas (@EricBalchunas) August 14, 2024

SEC’s Changing Stance on Leveraged Single-Stock ETFs

The approval of the MicroStrategy ETF by the SEC reflects a shift in the regulatory body’s stance on leveraged single-stock ETFs. After years of rejecting similar proposals, the SEC has recently approved several leveraged ETFs, including those focused on major companies like Tesla and Apple. 

While leveraged equity ETFs remain a niche segment, accounting for less than 1% of overall ETF assets, products like MSTX could gain traction due to their unique positioning in the market.

Defiance ETFs is positioning MSTX as a pioneering product that leverages the company’s Bitcoin holdings to offer amplified exposure to the cryptocurrency market. However, the success of this MicroStrategy ETF will ultimately depend on investor interest.

Moreover, Michael Saylor, Chairman of MicroStrategy personally holds over $1 billion in Bitcoin, further reinforcing his commitment to the cryptocurrency. The substantial Bitcoin holdings by both Saylor and MicroStrategy add a layer of interest to the MSTX ETF, as it offers investors a leveraged opportunity to gain exposure to Bitcoin through a regulated financial product.

At press time, Microstrategy  (MSTR) stock price is up 2.98% trading at $135.38 with a trading volume of $8,104,347.00 in the last 24 hours.