MicroStrategy (MSTR) – Think Bitcoin Will Go Down? New ETF Bets Against Bitcoin Bull Michael Saylor And MicroStrategy
MicroStrategy Incorporated MSTR Executive Chairman Michael Saylor has been one of the most outspoken bulls for Bitcoin BTC/USD in recent years, a thesis that has played out at the software company he founded, which invests heavily in the leading cryptocurrency.
What Happened: A new ETF from Rex Shares called the Rex Short MSTR ETF will allow investors the opportunity to easily short the performance of MicroStrategy and in effect short the price of Bitcoin as well.
The inverse ETF bets against the performance of the stock and offers an investment opportunity for those who believe the stock will fall in value. Single-stock ETFs and inverse ETFs are typically meant for short-term trades and for experienced investors.
“If you hate Bitcoin, you can short our stock,” Saylor told Benzinga in an interview this year.
The new ETF will short the stock and provide an opportunity for investors to profit along the way if the prices of MicroStrategy and Bitcoin fall.
As of June 30, 2022, MicroStrategy holds 129,699 Bitcoin, making it one of the largest holders of the leading cryptocurrency.
Why It’s Important: With its large Bitcoin weighting, some investors have shorted MicroStrategy as a way to get downside exposure to the leading cryptocurrency. While there are a number of ways to buy Bitcoin, the ability to short the cryptocurrency is less prevalent and more complicated for basic investors.
Betting against MicroStrategy with the new ETF could be a bet against the company’s philosophy of continued Bitcoin. Short interest in MicroStrategy has been rising with crypto prices falling. Short interest in MicroStrategy is 32.8% according to Fintel at the time of writing.
“We have a simple strategy and our strategy is we just acquire Bitcoin, and we hold the Bitcoin,” Saylor told Benzinga.
Saylor said Bitcoin remains attractive as a scarce and desirable investment that people will want to buy down the road.
“We think that the highest-quality, best asset in the world is Bitcoin. Everything else in the world is inferior to Bitcoin.”
The ProShares Short Bitcoin Strategy ETF BITI launched in June, providing investors with a cost-effective way to have short exposure to Bitcoin.
Single stock ETFs have grown in popularity and filings in 2022 with ETF companies offering inverse ETFs and also leveraged ETFs that bet on the outperformance of specific stocks.
Along with MicroStrategy, Rex Shares is offering inverse single stock ETFs targeting Coinbase Global Inc COIN, GameStop Corp. GME, AMC Entertainment Holdings AMC, Peloton Interactive Inc PTON, Tilray Inc TLRY, Nikola Corp NKLA, Robinhood Markets Inc HOOD, Beyond Meat Inc BYND and PENN Entertainment PENN.
Earlier this year, Direxion introduced single stock ETFs for Tesla Inc TSLA and Apple Inc AAPL.
AXS Investments launched single stock leveraged and inverse ETFs for NVIDIA Corporation NVDA, Tesla, PayPal Holdings Inc PYPL, Nike Inc NKE and Pfizer Inc PFE.
Another ETF, originally launched by Tuttle Capital Management in November 2021, but moved to AXS in May 2022, is the AXS Short Innovation Daily ETF SARK, which offers inverse exposure to the Ark Innovation ETF ARKK from Ark Invest and Cathie Wood.
BTC, MSTR Price Action: Bitcoin trades at $19,947.37 at the time of publication Tuesday versus a 52-week trading range of $17,708.62 to $68,789.63. The leading cryptocurrency has fallen about 8% in the last week.
MicroStrategy shares closed Tuesday at $240.23 in a 52-week range of $134.09 to $891.38.
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