these MicroStrategy ETFs are booming

Leveraged MicroStrategy exchange-traded funds are firing on all cylinders as inflows and their stocks surge.

MicroStrategy ETFs are on the rise

The Defiance Daily Target 1.75x Long MSTR ETF and T-Rex 2x Long MSTR Daily Target funds are up 28% and 31%, respectively, over the past five days. MSTX and MSTU also added $207 million and over $300 million in assets this year.

These ETFs have outperformed MicroStrategy shares, which are up 16.1% over the past five days.

The three assets continued their strong performance on Monday, October 14, as Bitcoin (BTC) and other cryptocurrencies rebounded. MicroStrategy shares were up more than 5.3% in premarket trading, while the MSTX and MSTU ETFs were up 9.50% and 10.6%, respectively.

MSTU and MSTX and MSTR | Source: SeekingAlpha

Bitcoin, the largest cryptocurrency by market cap, rose to $65,000 for the first time since September 30 as the crypto fear and greed index broke out of fear territory.

A potential catalyst for the rise was Chinese officials’ decision to offer more incentives. In a statement, Finance Minister Lan Fo’an vowed to continue supporting the struggling real estate sector and hinted that the government would increase spending.

As a result, analysts at Goldman Sachs strengthened their outlook for the economy. They now expect the economy to grow at 4.9%, above the previous forecast of 4.7%.

This statement led to a more optimistic atmosphere in financial markets, as stock indices in the USA, Asia and Europe continued their upward trend.

MicroStrategy’s shares often react to Bitcoin’s price movements due to the company’s significant holdings. According to BitcoinTreasuries, it has 252,220 tokens worth $16.3 billion on its balance sheet.

MSTU and MSTX present a high-risk, high-reward opportunity

Leveraged ETFs like MSTU and MSTX offer MicroStrategy investors a high-risk, high-reward opportunity using leverage.

With MicroStrategy increasing by 1% in one day, MSTU’s shares increased by 2 times, while MSTX’s shares increased by 1.75%. So, when MicroStrategy shares are rising, their total returns over time are typically strong.

MSTU and MSTX aim to replicate the success of other leveraged ETFs, such as ProShares UltraPro QQQ, which tracks the Nasdaq 100 index. The index has risen 430% over the past decade, while the TQQQ fund has gained over 2,360% over the same period.

However, risk arises when the underlying asset underperforms. For example, in 2022, the Nasdaq 100 index fell by 32%, while the TQQQ ETF fell by 79%.