ETF issuer Defiance ETFs has amped up leverage for its MicroStrategy ETF to 2X, according to a recent announcement.
According to ETF analyst Eric Balchunas, this means that the ETF will be able to offer 4x Bitcoin exposure.
Alex DovbnyaSylvia Jablonski, CEO of Defiance ETFs, has stated that the company recognized the "importance" of providing increased leverage in response to growing investor demand. Prior to that, the product would offer 1.75X leverage.
Tomiwabold OlajideAs reported by U.Today, T-Rex's MicroStrategy ETF also offers 2X leverage.
Leveraged ETFs are meant to double the performance of a specific stock. For instance, if the stock increases by 5% it gains 10%. These products make it possible for investors with higher levels of risk tolerance to secure amplified returns. The holdings of the ETF get recalibrated on a regular basis to make sure that they maintain the necessary leverage for a specific stock.
Nvidia (NVDA), Tesla (TSLA), Apple (AAPL), and other popular stocks have leveraged ETFs.
While leveraged ETFs can obviously offer significantly higher returns, their buyers can also face massive losses if a certain stock sees a sharp drop. These products tend to be extremely volatile (especially when it comes to such stocks as MicroStrategy.
The shares of MicroStrategy (MSTR) are up more than 20% over the past five days alone. Over the past six months alone, it has added more than 132%, substantially outstripping Bitcoin.
In the meantime, the price of Bitcoin came awfully close to reclaiming its previous all-time high on Tuesday. However, it has since given up some gains.
Arman Shirinyan
Vladislav Sopov
Dan Burgin