Asset manager GraniteShares files for RIOT, MARA, MSTR, and HOOD ETFs

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As a seasoned crypto investor with a decade of experience navigating the volatile digital asset market, I find GraniteShares’ latest move to file for new crypto-linked ETFs both intriguing and somewhat concerning. On one hand, the popularity of leveraged ETFs this year is undeniable, offering impressive returns when markets are surging. The success stories like the T-Rex 2x Long MSTR Daily Target fund (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX), which have outperformed MicroStrategy in the past three months, are proof of their allure.

Swiftly expanding investment firm, GraniteShares, boasting more than $10 billion under management, has submitted applications for fresh Exchange-Traded Funds (ETFs) linked to cryptocurrencies.

Last Friday, on December 20th, I learned that a New York-based firm has applied for innovative, leveraged ETFs to follow the trajectory of firms such as Riot Blockchain, Marathon Digital Holdings, MicroStrategy, and Robinhood, all prominent players in the crypto sphere. This potential development has me keeping a keen eye on these stocks, as it could mean greater exposure to this dynamic market for investors like myself.

GraniteShares files for new crypto-related ETFs

Marathon Digital and Riot Blockchain are the top two Bitcoin mining corporations, and they rank as the third and second largest Bitcoin owners respectively, holding approximately 44,394 and 17,429 Bitcoins on their financial statements.

MicroStrategy possesses the greatest number of cryptocurrency coins (approximately 439,000), whereas Robinhood functions as a significant platform for both crypto and stock investment opportunities.

These investments can be leveraged for twice the potential gain or loss. ETFs that are 2x long will increase returns by a factor of two compared to their underlying stocks each day, for instance, the GraniteShares 2x Long RIOT ETF would grow by 2% if Riot Platform’s stock grows by 1%. Similarly, these investments can also be 2x short, meaning they could potentially lose twice as much when their underlying stocks increase.

GraniteShares has recently filed applications for several 2x and -2x stock Exchange-Traded Funds (ETFs) involving companies like MicroStrategy ($MSTR), Mara ($MARA), Square ($SQ), Riot Blockchain ($RIOT), and Coinbase Global ($HOOD).

— Eric Balchunas (@EricBalchunas) December 20, 2024

This year, these ETFs that leverage investments have seen a surge in popularity due to both the crypto and stock markets reaching unprecedented highs. The reason for their appeal among investors is that they frequently deliver impressive returns during periods of rising stock prices.

1) The T-Rex 2x Long Mastercard Daily Target fund (MSTU) and the Defiance Daily Target 2X Long Mastercard ETF (MSTX) have both amassed more than $1.8 billion in total investments under their management.

Over the last three months, these funds have outperformed MicroStrategy. While MicroStrategy’s stock price increased by 150%, the shares of both MSTU and MSTX saw a greater rise, with MSTU up by 308% and MSTX up by 253%.

As a researcher, I’ve observed that the potential downside is that their performance may underperform the base stock during a bear market. For instance, MicroStrategy’s stock decreased by 24% in the last month, whereas MSTU and MSTX have experienced a significant drop exceeding 50% within the same timeframe.

The same performance has happened among other leveraged ETFs over time. For example, the ProShares UltraPro QQQ ETF, which generates 3x returns of the Nasdaq 100 index, dropped by 79% in 2022 as the underlying asset fell by 32%. It closed Friday at $30.75, down 2.54%.

Other businesses have introduced various cryptocurrency-centric Exchange Traded Funds (ETFs). Notably, YieldMax has introduced Covered Call ETFs for multiple crypto firms, such as the Coin Option Income ETF, MARA Option Income ETF, and MSTR Option Income ETF.

These Exchange-Traded Funds (ETFs) employ a strategy known as “covered call writing” to generate regular income for their investors. In this approach, the ETF buys stocks and then sells call options on those same stocks. By doing so, it collects premiums from the sale of these options, which are subsequently distributed to the investors on a monthly basis.

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2024-12-21 19:56