Acolytes of Bitcoin (BTC) billionaire Michael Saylor should steer clear of the new leveraged MicroStrategy (MSTR) exchange-traded fund (ETF). The ETF takes on needless risks and is almost certain to underperform spot BTC over time. There are better ways to bet on BTC.
On Aug. 15, Defiance ETFs — an asset manager specializing in “leveraged exposure to disruptive companies without the need for a margin account” — launched the Defiance Daily Target 1.75X Long MSTR ETF (MSTX). It reached $22 million in volume on its first day.
According to Defiance, MSTX is the “first single-stock long leveraged ETF for MicroStrategy” and “seeks to provide 175% long daily targeted exposure to” the stock. In practice, that means adding risky leverage to an already convoluted and speculative investment. It’s not worth the risk.
Business intelligence firm or Bitcoin hedge fund?
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 BTC.
Related: Expect Bitcoin ETF options to launch before 2025
The strategy paid off. Over the past four years, shares of MSTR surged by roughly 1,000%. The stock has outperformed BTC by some 50% and more than doubled the returns of investment legend Warren Buffet’s Berkshire Hathaway.
The Defiance Daily Target 1.75X Long MSTR ETF (MSTX) hit $22 million in volume on its first day. Source: X
Since then, MicroStrategy has doubled down. On its Aug. 1 earnings call, MicroStrategy announced it was adopting a new lodestar for corporate performance: “Bitcoin Yield”, a measure of BTC-per-share.
The premise is that, as a public company, MicroStrategy can tactically leverage its balance sheet — mainly by borrowing or issuing shares — to accumulate BTC in a way that gradually ratchets up its BTC-per-share ratio, benefiting shareholders.
MicroStrategy uses “Bitcoin Yield” as a lodestar for performance. Source: MicroStrategy
The idea makes sense, especially in light of MSTR’s frothy stock price. Plenty of companies — especially meme stocks —…
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