By
Godfrey Benjamin
June 28th, 2024
In addition to the “ghost pepper” ETF, T-Rex Group has also filed for other leveraged and inverse Bitcoin ETFs.
Financial services firm T-Rex Group has officially filed for a 2X leveraged MicroStrategy (MSTR) exchange-traded fund (ETF) in the United States. This ETF has been coined the “ghost pepper” of ETFs by analysts due to its anticipated extreme volatility.
Eric Balchunas, a senior ETF analyst at Bloomberg, noted that if approved, this fund could exhibit volatility levels up to 20 times that of the S&P 500, making it potentially the most volatile ETF ever seen in the US market.
Balchunas compared the volatility of this ETF to that of a 3X leveraged MicroStrategy ETF available in Europe, which already exhibits substantial fluctuations. He mentioned that the QQQ, an index tracking the top 100 publicly traded companies in the US, looks as stable as a money market fund in comparison.
A Suite of Leveraged and Inverse ETFs
In addition to the “ghost pepper” ETF, T-Rex Group has also filed for other leveraged and inverse Bitcoin ETFs. These include products aiming for both long and short positions with varying degrees of leverage, such as the T-Rex 1.5X Long Spot Bitcoin Daily Target ETF and the T-Rex 2X Inverse Spot Bitcoin Daily Target ETF.
These ETFs will use the yet-to-be-launched iShares Spot Bitcoin ETF as their initial reference, with the flexibility to switch to other spot Bitcoin ETFs. This suite of ETFs aims to cater to investors looking for amplified exposure to Bitcoin’s price movements, both positive and negative.
MicroStrategy’s Big Bitcoin Bet
MicroStrategy, led by CEO Michael Saylor, has consistently made headlines with its bold and aggressive Bitcoin acquisition strategy. Beginning in August 2020, the company embarked on a massive shift in its corporate treasury management, choosing to adopt Bitcoin as its primary reserve asset.
Since then, MicroStrategy has continued to accumulate Bitcoin, making regular purchases through various means, including debt offerings and utilizing cash reserves. As of June 24, 2024, MicroStrategy holds 226,331 bitcoins. The company reports an average acquisition cost of $35,158 per bitcoin, bringing the total investment to $7.5 billion.
Saylor and his team believe in the long-term benefits of Bitcoin’s deflationary nature and its role as a store of value. This conviction has made MicroStrategy stock highly correlated with Bitcoin price movements. The high implied volatility of MicroStrategy stock, currently at 85.6, demonstrates the potential for significant price swings.
MicroStrategy’s financial moves have caught the attention of financial services firms like T-Rex Group. As the SEC reviews T-Rex Group’s application, market participants will be keenly observing for approval and the subsequent impact on the market.