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
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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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