Bitcoin proxy MicroStrategy could soon see its price swings amplified by spicy ETFs

Investors seeking leveraged exposure BitcoinPricing could be in store for some spicy TradFi products, following T-Rex Group’s filing of several MicroStrategy ETFs on Thursday.

The issuer of leveraged funds for tech giants like Tesla and Nvidia has signaled that the Bitcoin-hungry software company is next on its plate. T-Rex has submitted applications for two ETFs, including one that would offer 2x long performance on MicroStrategy shares, as well as a correlated inverse option, according to deposits with the United States Securities and Exchange Commission (SEC).

The heat associated with digital assets may already be too hot for some. And according to Bloomberg ETF analyst Eric Balchunas, the ETFs offered by T-Rex are positioned toward the particularly hot end of the Scoville scale, which is used to measure the heat of chili peppers.

“These are almost certain to be the most volatile ETFs ever seen in the United States,” he said. wrote on Twitter (aka X), describing the entire product as “the ghost pepper of ETF hot sauce.”

Given that MicroStrategy is using debt and equity to acquire more Bitcoin, the company could already be considered a leveraged play on Bitcoin. Rather than simply holding Bitcoin as an investment vehicle, such as Bitcoin spot ETFs, MicroStrategy has leveraged tools to accumulate the asset.

Earlier this month, MicroStrategy unveiled plans to issue $700 million in senior unsecured convertible notes to add to its massive Bitcoin stash. It’s finally strengthened its assets to 226,331 BTC after purchase, or approximately $13.8 billion at the time of writing. In the cryptocurrency space, the company has built a reputation as the largest corporate holder of Bitcoin.

Balchunas has previously compared spot Bitcoin ETFs to hot sauce, suggesting that a small exposure in the average investor’s portfolio is an acceptable path for most. Most people “are just going to add a little bit,” he said. wrote Bitcoin spot ETFs in April.

Since MicroStrategy embarked on its Bitcoin buying spree, the company has occasionally faced significant price swings. Its biggest single-day drop came in May 2022, falling 25% due to the fallout in the cryptocurrency market, according to Market chameleon.

That being said, MicroStrategy’s stock price is up 109% to $1,433 year-to-date, thanks to the approval of spot Bitcoin ETFs, which gave investors more exposure options in January. Previously, MicroStrategy was considered a popular Bitcoin proxy bet on Wall Street.

Edited by Andre Hayward

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