Financial services company T-Rex Group has submitted paperwork for a leveraged MicroStrategy (MSTR) exchange-traded fund in the United States – characterized by one analyst as a high-risk “ghost pepper” of ETFs due to its potential for extreme fluctuations.
Should the fund receive approval, it would subject investors to roughly 20 times the usual volatility of the S&P 500 index. In a post dated June 27 on X, senior Bloomberg ETF analyst Eric Balchunas described these ETFs as the most volatile ever witnessed in the U.S., dubbing them the “ghost pepper of ETF hot sauce.”
Balchunas referenced the current volatility of a three-times-leveraged MicroStrategy ETF in the European market, highlighting how it made the QQQ, which tracks the top 100 publicly traded U.S. companies, resemble a conservative “money market fund.”
Established as a software firm in 1989 by current executive chairman Michael Saylor, MicroStrategy has evolved into one of the largest public holders of Bitcoin, currently possessing an impressive 214,400 BTC valued at $13.2 billion.
Saylor, a strong advocate of Bitcoin, justifies the company’s significant Bitcoin holdings as a hedge against inflation and a superior alternative to holding cash.
MicroStrategy’s stock has surged by 120% since the beginning of the year and 336% compared to this time last year, buoyed by the remarkable rise in Bitcoin’s price during the same period.
Bitcoin is presently trading at $61,589, marking a 104% increase in the last year according to TradingView data.
In 2020, Saylor shifted MicroStrategy’s focus to Bitcoin acquisitions, utilizing the company’s equity to acquire substantial amounts of the cryptocurrency.
Following MicroStrategy’s lead, other companies have adopted Bitcoin-centric treasury-hedging strategies. For instance, on April 9, Japanese investment firm Metaplanet disclosed a $6.5 million Bitcoin purchase as a core treasury asset, resulting in an 89% surge in its stock price that day.
Similarly, on May 28, healthcare company Semler Scientific bought 581 BTC for $40 million to bolster its core treasury strategy.
Most recently, on June 10, Canadian exchange-traded product (ETP) issuer and venture capital firm DeFi Technologies revealed the acquisition of 110 Bitcoin as a central reserve asset for the company.