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They follow Defiance ETF’s launch of a 1.75x leveraged MSTR ETF in August.
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Asset managers REX Shares and Tuttle Capital Managed jointly launched two exchange-traded funds (ETFs) designed to provide leveraged exposure to MicroStrategy’s (MSTR) share performance, according to a Sept. 18 announcement.
The ETFs — T-REX 2X Long MSTR Daily Target ETF (MSTU) and T-REX 2X Inverse MSTR Daily Target ETF (MSTZ) — aim for 2x leveraged long and short exposure to MSTR, respectively, REX and Tuttle said.
The ETF launches follow the August launch of a similar ETF by rival issuer Defiance ETFs, which demonstrated strong demand among retal investors for leveraged exposure to MSTR.
The new entrants may set off a “hot sauce arms race,” Eric Balchunas, a Bloomberg Intelligence ETF analyst, said in a Sept. 18 post on the X platform.
Source: X
Related: Bitcoin bulls should steer clear of MicroStrategy’s new leveraged ETF
In August, rival issuer Defiance ETFs launched the first leveraged MSTR ETF, Defiance Daily Target 1.75X Long MSTR ETF (MSTX). It seeks to deliver 175% exposure to MSTR’s performance.
Defiance’s ETF saw $22 million in volume in its first day of trading, “which may be a Day One record for a leveraged ETF,” Eric Balchunas, a Bloomberg Intelligence ETF analyst, said in an Aug. 15 post on the X platform.
REX and Tuttle’s competing ETFs “will leapfrog Defiance’s 1.75x MSTR (which has been a instant hit)” and “will deliver volatility estimated to be about 15x that of SPX,” Balchunas said.
MSTX already has more than $186 million in net assets. Source: Defiance ETFs
Originally a business intelligence firm, MicroStrategy transformed into a de-facto cryptocurrency hedge fund in 2020 when founder Michael Saylor started using the company’s balance sheet to buy up Bitcoin (BTC).
On Aug. 1, MicroStrategy adopted a new lodestar for corporate performance: “Bitcoin Yield”, a measure of BTC-per-share. Its goal is to leverage its balance sheet to accumulate BTC on terms favorable to shareholders.
On Sept. 16, MicroStrategy announced plans to issue $700 million in debt, partly to buy more BTC.
Leveraged ETFs add additional risk to MSTR and tend to underperform to do the costs of daily rebalances to maintain a leverage target. They also typically hold financial derivatives rather than the underlying stock.
The ETFs “provide traders with a powerful set of tools to engage with a company that’s pushing the boundaries in digital assets,” Greg King, CEO of REX Financial, REX Shares parent company, said in a statement.
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This article first appeared at Cointelegraph.com News
