The first Bitcoin-related leveraged exchange-traded fund (ETF) has launched in the United States, marking another important milestone in the adoption of cryptocurrency by institutional investors.

The new leveraged MicroStrategy ETF, MSTX, aims to provide 175% long daily targeted exposure to MicroStrategy.

This ETF could offer greater leveraged exposure to Bitcoin, according to Sylvia Jablonski, CEO of Defiance ETFs, who stated in an Aug. 15 announcement:

“We’re amplifying the potential for investors seeking long-leveraged exposure to Bitcoin. 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."

ETF inflows can play a significant role in driving up a cryptocurrency’s price.

For instance, Bitcoin ETFs were responsible for about 75% of new investment in the cryptocurrency by Feb. 15, as it surpassed the $50,000 mark.

MicroStrategy is among the first publicly traded companies to hold Bitcoin on its balance sheet.

The company has outperformed 99% of the firms in the S&P 500 index, according to an Aug. 11 X post by MicroStrategy founder Michael Saylor, who wrote:

“Four years ago today, MicroStrategy adopted #Bitcoin as its primary treasury reserve asset; since then $MSTR has outperformed 499 of 500 stocks in the S&P 500.”

This new leveraged ETF could attract significant interest from investors due to the strong price performance of MicroStrategy stock, which has outpaced Bitcoin in recent months.

In the past six months, MicroStrategy shares have increased by over 70%, while Bitcoin's price has risen by only 13%, according to data from Bitstamp.

Due to the high-risk nature of leveraged investments, the fund is intended for more sophisticated investors rather than retail investors, as highlighted in Defiance’s announcement:

“The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies.”

The ETF may become the most volatile in the U.S. market, according to Eric Balchunas, a senior ETF analyst at Bloomberg, who commented in an Aug. 14 X post:

“It will be the most volatile ETF you can get in the US market (equiv to 13x SPY) edging out $MSOX (2x weed), a big step in the hot sauce arms race.”

Sources:

https://cointelegraph.com/news/first-leveraged-microstrategy-etf-launches-us

https://www.globenewswire.com/news-release/2024/08/15/2930650/0/en/Defiance-Launches-MSTX-The-First-Leveraged-Single-Stock-ETF-on-MicroStrategy-in-the-US.html%5D

https://x.com/saylor/status/1822604650593349832

https://www.tradingview.com/chart/3Z94myyP/?symbol=BITSTAMP%3ABTCUSD

https://x.com/EricBalchunas/status/1823824187481579833/photo/1