GraniteShares, an asset manager with over $10 billion in assets, has filed for new crypto-linked exchange-traded funds. On Dec. 20, the New York-based firm submitted filings for new leveraged ETFs tracking companies like Riot Platforms, Marathon Digital, MicroStrategy, and Robinhood.
Marathon Digital and Riot Platforms are significant Bitcoin mining companies and among the top Bitcoin holders, with 44,394 and 17,429 coins respectively. MicroStrategy holds the largest number of coins at 439,000, and Robinhood is a major platform for crypto and stock investments. The new funds will be both 2x long and 2x short, with 2x long ETFs doubling the daily returns of the corresponding stocks.
These leveraged ETFs have gained popularity this year as crypto and stock markets reached record highs. Investors are attracted by their potential for strong returns during an uptrend. For instance, the T-Rex 2x Long MSTR Daily Target fund (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX) have amassed over $1.8 billion each in assets under management and have outperformed MicroStrategy’s stock in the past three months, with MSTU up 308% and MSTX up 253% compared to MicroStrategy’s 150% rise.
However, there is a risk. In a bear market, their performance typically lags behind the underlying stock. MicroStrategy’s stock declined 24% in the last 30 days, while MSTU and MSTX dropped over 50% during the same period. Similar trends have been seen in other leveraged ETFs, like the ProShares UltraPro QQQ ETF, which fell 79% in 2022 when the underlying asset decreased by 32% and closed at $30.75 on Friday, down 2.54%.
Other companies, such as YieldMax, have launched different types of cryptocurrency-focused ETFs, including covered call ETFs like the Coin Option Income, MARA Option Income, and MSTR Option Income ETFs. These use covered call option strategies to generate monthly income for investors by investing in stocks, selling call options, and distributing the premiums monthly.
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