MicroStrategy Leveraged ETFs' Impact on Crypto Markets Is Growing: JPMorgan

Leveraged MicroStrategy ETFs attracted $3.4 billion of inflows in November, the report said.

Dec 5, 2024, 4:47 p.m. UTC

The increased size of leveraged MicroStrategy (MSTR) exchange-traded funds (ETFs) and the flows they attract are having a more pronounced effect on the company's stock and crypto markets than before, JPMorgan (JPM) said in a research report on Wednesday.

These ETFs played a significant role in amplifying the stock's near-60% rise in November, the bank said.

November saw a record of almost $11 billion flow into U.S. spot bitcoin (BTC), spot ether (ETH) and leveraged MicroStrategy ETFs combined, the report said, with the leveraged MSTR ETFs accounting for $3.4 billion, or almost a third, of the total.

"This highlights the rising impact of MicroStrategy's leveraged ETFs in crypto markets via facilitating MicroStrategy's bitcoin purchase program," analysts led by Nikolaos Panigirtzoglou wrote.

The company founded by Michael Saylor has spent $13 billion buying bitcoin this quarter alone, the report noted.

"The growth in these ETFs is fuelled by increasing investor demand in obtaining amplified exposure to bitcoin through an ETF wrapper," the authors wrote, adding that this would not normally be available to retail investors.

MicroStrategy shares allow investors who are restricted from investing in spot bitcoin ETFs to obtain exposure to the world's largest cryptocurrency, and due to the software company's inclusion in benchmarks such as the MSCI World index, the stock benefits from sizable passive flows.

The company's share price also reflects investor optimism about the potential profitability of MicroStrategy's corporate strategy, including its plans to become a bitcoin bank and develop BTC applications, and this adds a premium to the firm's valuation, the report added.

MicroStrategy currently meets the eligibility criteria for inclusion in the Nasdaq-100 index, according to Benchmark analyst Mark Palmer.

Read more: MicroStrategy Looks Poised to Join Influential Nasdaq-100 Index. Here's What That Means for the Stock

Will Canny

Will Canny is an experienced market reporter with a demonstrated history of working in the financial services industry. He's now covering the crypto beat as a finance reporter at CoinDesk. He owns more than $1,000 of SOL.