Wave of Leveraged ETFs Targets Bitcoin, Ethereum, BNB
The new products are designed to give investors more yield than the average spot fund.
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No one can predict the spot price of crypto, but they can at least leverage it.
Exchange-traded fund providers are coming up with increasingly creative ways to give investors access to digital assets. The latest example comes from VanEck, which launched last week the first US-listed ETF designed to track BNB, the native asset of one of the world’s largest blockchain ecosystems. Direxion also announced two new ETFs leveraging exposure to bitcoin and Ethereum, as well as two others tracking gold and silver, assets that have all been used as inflation hedges. The move signals an increasing appetite for products that allow investors to leverage short-term bets on the market and comes at an interesting time for the asset class: More than $1 billion exited spot bitcoin ETFs in the last week alone.
“At this point, we’re seeing DeFi and TradFi increasingly coming together,” said Mo Sparks, chief product officer at Direxion.
Spot Plays
The Direxion funds bill themselves as the first to offer pure swap spot exposure, giving buyers 2x leverage on existing ETFs, specifically the largest funds in each of the asset categories. (The spot bitcoin fund, for example, invests in IBIT.) While none of the funds are holding the crypto or precious metals directly, the underlying ETFs are. “We’re wrapping and getting exposure at the 2x level via a swap from a bank to IBIT,” he said. “Others do something similar but include futures or are only futures [contracts].”
The research shows leveraged spot products may pick up from here:
- According to a recent Morningstar report, more than 300 funds that launched last year were trading-leveraged equity products, more than any other category the firm tracks.
- More than 90% of trading in single-stock, leveraged funds was done by individual investors, showing their allure within the retail market.
HODL On a Sec: The VanEck BNB ETF (VBNB) is the latest product in the company’s crypto suite, which includes the popular HODL fund. The issuer is hoping to tap into growing demand for BNB, which is one of the top 5 cryptocurrencies in the world by market cap and among the top 3 based on daily active users, according to a statement. “Until today, BNB stood out among major crypto assets as one of the few not yet available in a US spot ETP,” Kyle DaCruz, VanEck’s director of digital assets products, said in the release.
