SEC Approves MSTX Leveraged ETF Targeting MicroStrategy’s Bitcoin-Fueled Stock

• MSTX offers 175% daily return on MicroStrategy stock, leveraging its Bitcoin exposure.  
• The ETF is highly volatile due to MicroStrategy’s Bitcoin holdings and daily leveraged design.  
• MSTX’s launch signals a change in SEC’s approach to leveraged single-stock ETFs.

The U.S. Securities and Exchange Commission (SEC) has approved the launch of MSTX, the first leveraged single-stock exchange-traded fund (ETF) targeting MicroStrategy, a company well-known for its Bitcoin holdings. Issued by Defiance ETFs, MSTX aims to deliver 175% of MicroStrategy’s stock’s daily return, offering investors an opportunity to gain amplified exposure to Bitcoin through the ETF.

Defiance ETFs, a provider of thematic and leveraged ETFs, has launched MSTX to take advantage of MicroStrategy’s significant Bitcoin holdings. As of the second quarter of 2024, MicroStrategy had over 226,500 Bitcoins in its possession.

MicroStrategy’s strategy of leveraging debt to acquire Bitcoin further enhances the stock’s volatility, making MSTX an attractive option for investors seeking a leveraged play on Bitcoin’s price movements.

Sylvia Jablonski, CEO of Defiance ETFs, highlighted the unique position of MSTX, noting that MicroStrategy’s higher beta compared to Bitcoin provides investors with an opportunity to maximize their leveraged exposure to the cryptocurrency market within an ETF structure. 

The ETF’s performance will be closely tied to MicroStrategy’s stock price, which is heavily influenced by Bitcoin’s value.

Leveraged ETFs like MSTX are designed to achieve their investment objectives daily, meaning their performance is amplified daily. However, this also means that the results can vary over extended periods, introducing additional risks for investors. 

The concentration of the ETF in a single stock, combined with the use of leverage, further increases volatility and potential risk.

In response to the debut, Eric Balchunas, Senior ETF Analyst at Bloomberg, noted that the leveraged MicroStrategy ETF can become one of the most volatile ETFs offered in the US market.

The approval of MSTX marks a shift in the SEC’s stance on leveraged single-stock ETFs following years of rejecting similar proposals. Other companies, such as GraniteShares and Direxion, have also received approval for leveraged ETFs targeting Tesla and Apple.