Financial services company T-Rex Group has submitted an application for a leveraged MicroStrategy (MSTR) exchange-traded fund in the United States, which one analyst has likened to a “ghost pepper” of ETFs due to its potential for volatility.
According to senior Bloomberg ETF analyst Eric Balchunas, if the fund is approved, it would expose investors to approximately 20 times the typical volatility of the S&P 500. Balchunas described these potential ETFs as “the ghost pepper of ETF hot sauce” in a post on X on June 27.
Balchunas also pointed out the current volatility of a three-times-leveraged Microstrategy ETF on the European market, stating that it made the QQQ, an index of the top 100 publicly traded companies in the United States, look like a “money market fund.”
MicroStrategy, initially founded as a software company in 1989 by current executive chairman Michael Saylor, has since become one of the largest publicly traded holders of Bitcoin. The company currently holds a staggering 214,400 Bitcoin (BTC) valued at $13.2 billion on its books.
Michael Saylor, an outspoken Bitcoin advocate, has provided reasoning for holding such large quantities of Bitcoin through the company. He believes that the asset serves as a hedge against inflation and a superior alternative to holding cash.
MicroStrategy shares have surged 120% since the beginning of the year and 336% from this time last year, largely driven by the significant increase in the price of Bitcoin during the same period.
In recent years, many companies have followed MicroStrategy’s example, adopting a Bitcoin-focused treasury-hedging strategy. Japanese investment firm Metaplanet announced the purchase of $6.5 million worth of Bitcoin as a core treasury asset, causing its stock price to soar more than 89% on the day. Similarly, healthcare firm Semler Scientific acquired 581 BTC for $40 million as part of its core treasury strategy. Canadian exchange-traded product (ETP) issuer and venture capital firm DeFi Technologies also announced the acquisition of 110 Bitcoin as its company’s core reserve asset on June 10.