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SEC approves MicroStrategy’s leveraged crypto ETF

SEC approves MicroStrategy’s leveraged crypto ETF

CryptopolitanCryptopolitan2024/08/15 16:00
By:By Jai Hamid

Share link:In this post: The SEC just approved the first leveraged MicroStrategy crypto ETF, letting investors double their exposure to the company’s Bitcoin holdings. MicroStrategy continues to go all-in on Bitcoin, holding over 226,500 coins, but it’s facing some serious financial challenges. The company reported a $102.6 million net loss in Q2 2024, with its stock price taking a hit after the earnings announcement.

The SEC has finally done it—given the thumbs up to the first-ever leveraged MicroStrategy crypto ETF. This lets you double down on the crazy ride that is MicroStrategy’s Bitcoin obsession.

Led by Michael Saylor, the company has become the poster child for corporate Bitcoin adoption. These guys are holding more Bitcoin than 97% of all holders. 

The BitcoinStrategy

So, what does this mean for the crypto market? For starters, it’s a huge win for those who believe in the future of Bitcoin. MicroStrategy is known for its aggressive Bitcoin strategy, and this ETF cranks it up a notch. 

It allows investors to gain leveraged exposure to MicroStrategy’s stock, which is basically a proxy for holding Bitcoin itself. But leveraged ETFs are not for the faint of heart. They can multiply gains, sure, but naturally, they can also magnify losses.

SEC approves MicroStrategy’s leveraged crypto ETF image 0

If Bitcoin takes a hit, this ETF will feel the pain—big time. It’s a high-risk, high-reward game, and everyone who jumps in should know the stakes.

As of the second quarter of 2024, MicroStrategy is sitting on a stash of 226,500 Bitcoins, worth around $15 billion. During Q2 alone, they added 12,222 Bitcoins to their hoard, buying each coin at an average price of $65,882. 

MicroStrategy’s Financial Rollercoaster

Saylor’s obsession with Bitcoin hasn’t come without its costs. In Q2, MicroStrategy’s financials weren’t exactly rosy. The company saw its revenue drop to $111.4 million, a 7.4% decline from the previous year. 

See also US spot Bitcoin ETFs record net outflows worth $81 million, ending a two-day streak

That might not seem catastrophic, but when you factor in a net loss of $102.6 million, things start to look a bit concerning.

For a company that once posted a profit of $22.2 million in the same quarter the year before, this is a massive turnaround—and not in the good sense. The loss per share came in at $5.74, compared to a profit of $1.68 per share in Q2 2023. 

The market didn’t take kindly to these numbers, and the stock price tumbled by 15% in the week after the earnings report.

SEC approves MicroStrategy’s leveraged crypto ETF image 1

America’s approval of spot Bitcoin ETFs has triggered an unprecedented institutional interest in Bitcoin. And guess who’s trying to ride that wave? You got it—MicroStrategy.

The company is making itself as the go-to for institutional players wanting to get into Bitcoin without directly holding the asset. It’s a clever move, especially with more pension funds and big money players dipping their toes into crypto. 

For example, South Korea’s National Pension Service bought nearly $34 million worth of MicroStrategy shares in Q2.

But let’s not get too cozy with these big numbers. MicroStrategy’s bet on Bitcoin is still risky business. Sure, it has and could pay off big time if Bitcoin soars, but if the market goes south, things could get ugly fast.

See also US Democrats make one last attempt to win crypto lovers over for Kamala Harris
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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