Betting on "Bitcoin shadow stocks" is more exciting than betting on NVIDIA: The most volatile ETF in the US stock market is here

In the U.S. ETF market known for high-risk products, the preference for risk is often not the highest, but higher. A newly emerged ETF stands out as a leader in high-risk volatile investments.

This Thursday, Defiance, managing $1.4 billion in assets, launched an ETF with the trading code MSTX - Defiance Daily Target 1.75X Long MSTR ETF. From its full name, it can be seen that the fund aims to provide daily leveraged investment returns by betting on the stock code MSTR of the U.S. business intelligence and mobile software company MicroStrategy Inc.

MicroStrategy, known for its large holdings of Bitcoin, has been dubbed the "Bitcoin shadow stock". Just this year, on March 11th, the company made a bold move by investing nearly $822 million in acquiring 12,000 bitcoins.

As MicroStrategy is seen as an alternative to Bitcoin, the stock's 90-day volatility is around 97%. Therefore, the media estimates that Defiance's new ETF MSTX may become the most volatile ETF in the U.S. market. In comparison, another stock with significant volatility, Tesla, has a 90-day volatility of 66%, while Nvidia, which has experienced surges and drops mentioned by Wall Street News earlier this month, has a volatility index of 63%. In contrast, the fund tracking the S&P 500 index, SPY, has a volatility of only 14%.

The media points out that for most of this year, the U.S. stock market has been on an upward trend, and ETFs that provide high returns or inverse returns on individual stocks using derivatives have become increasingly popular, attracting billions of dollars in funds as a series of issuers introduce new products. MSTX is a new member of this type of fund, and its investors may face the most intense volatility among all ETFs. Some commentators suggest that the high-risk ETF market is currently in a fierce "arms race", with more and more issuers hoping to push the limits of volatility, as there is a market for such products.

In July 2022, the first leveraged single-stock ETF in the U.S. was officially listed, marking the entry of the U.S. ETF market into the "individual stock era". These innovative ETFs apply the mechanism of leveraged investment multiples to individual stocks, allowing investors to make leveraged long or short investments in the underlying stocks by purchasing such products.

Officials from the U.S. Securities and Exchange Commission (SEC) have issued warnings about these ETFs that profit from volatility, especially regarding the risks to retail investors. However, the warnings have not dampened the enthusiasm of Wall Street and investors. Leveraged funds cover a variety of assets, strategies, and themes. Many companies can also charge relatively higher fees for related products, as large ETF issuers with lower fees do not venture into leveraged and inverse funds. Todd Sohn, ETF strategist at Strategas, stated that leveraged single-stock ETFs have clearly struck a chord with tradersThis is a new frontier, especially for small issuers trying to establish a presence in the industry.

According to media estimates, in the past two quarters, the assets under management of single-stock ETFs have nearly doubled, reaching approximately $8.5 billion. These ETFs have also performed well this year. For example, two ETFs that are leveraged two times long on NVIDIA - T-Rex 2X Long NVIDIA Daily Target ETF (NVDX) and GraniteShares 2x Long NVDA Daily ETF (NVDL) have achieved returns of 330% and 290% respectively. Among them, the assets of NVDL have surged from around $200 million at the beginning of the year to $5 billion