T-Rex Group Files for Potentially Volatile MicroStrategy ETF Amid Rising Bitcoin Trend
Summary:
The T-Rex Group has applied for a leveraged MicroStrategy exchange-traded fund (ETF) in the United States, which experts predict could expose investors to high levels of volatility. Since its foundation as a software company in 1989, MicroStrategy has evolved into one of the largest Bitcoin holders among public firms and its shares have surged due in part to the Bitcoin boom. Many companies are now starting to adopt the Bitcoin-focused acquisition strategy developed by MicroStrategy.
The T-Rex Group, a firm specializing in financial services, has lodged an application for a leveraged MicroStrategy (MSTR) Exchange-Traded Fund (ETF) in America. Due to the prospective volatility of this ETF, industry pundits have labeled it the "ghost pepper" of ETFs. As per an analysis by Eric Balchunas, a senior ETF analyst at Bloomberg, should this fund receive approval, investors could face up to 20 times the standard volatility of the S&P 500. Balchunas refers to the current volatility of a triple leveraged MicroStrategy ETF in Europe, suggesting it makes the QQQ— an index of the top 100 publicly traded companies in America — appear akin to a “money market fund.”
MicroStrategy, initially founded as a software firm by Michael Saylor in 1989, has morphed into one of the biggest public holders of Bitcoin, boasting 214,400 Bitcoins, equating to $13.2 billion, in its portfolio. Saylor, a well-known Bitcoin enthusiast, offers a plausible rationale for maintaining such a vast quantity of Bitcoin; it serves as a hedge against inflation and is a more sensible alternative to keeping cash. Driven by the significant surge in Bitcoin prices this year and the last, MicroStrategy's shares have risen 336% from a year ago and 120% since the beginning of 2021. The shares have marked an increase of 120% this year alone.
Bitcoin's current trading price stands at $61,589, marking an increase of 104% over the past year, according to TradingView data. Saylor embarked on a strategy of Bitcoin-concentrated acquisition in 2020, and subsequently used MicroStrategy equity to purchase substantial Bitcoin amounts. Recently, several firms have replicated MicroStrategy's strategy, adopting a Bitcoin-centric treasury-hedging approach.
On April 9th, Japan's investment company Metaplanet announced that it had bought Bitcoin worth $6.5 million as a primary treasury asset, this resulted in the company's stock price soaring by over 89% on the same day. Meanwhile, healthcare company Semler Scientific purchased 581 BTC at a cost of $40 million on May 28th as part of its key treasury strategy. The most recent endeavor came from Canadian exchange-traded product (ETP) issuer and VC firm DeFi Technologies on June 10th, when they made public their acquisition of 110 Bitcoins as their main reserve asset.
Published At
6/28/2024 8:52:00 AM
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