Move Over, Bitcoin: New SpaceX ETF Just Doubled IBIT's Historic Debut - Leverage Shares 2X Long SPCX Dail

In January 2024, BlackRock's iShares Bitcoin Trust (NASDAQ:IBIT) set a record, generating as much as $500 million in volume for its second trading day.

Yet, that record stood for barely two and a half years. Following Elon Musk's newly public SpaceX (NASDAQ:SPCX), investor enthusiasm has spilled far beyond the stock itself and into a growing universe of leveraged exchange-traded funds.

As many as 25 ETF products launched following the stock's highly anticipated IPO debut. Still, a Leverage Shares 2X Long SPCX Daily ETF (BATS:SPCH) attracted most attention, generating as much as $1.3 billion in day-two trading volume – according to Walter Bloomberg's X post.

Why SPCH's Lead Matters

Collectively, newly launched SpaceX derivative ETFs generated more than $3 billion in day-two trading volume. Nearly every fund from that group rapidly surpassed $100 million in assets under management, signaling widespread interest from traders.

What makes SPCH stand out is the competitive landscape it faced. When IBIT launched, it benefited from being one of the primary gateways for investors seeking spot Bitcoin exposure. Trading activity was heavily concentrated.

SPCH didn't have that advantage.

Wall Street firms released a crowded field of competing products simultaneously, including leveraged funds such as SPAX, SPCF, and SPCM. On the bearish side, inverse products like SSPC and SPCG also entered the market.

But, despite the competition, SPCH captured nearly half of the volume. However, its preference also says a lot about the customer base.

The 2X Trap: Why These Are Not Buy-and-Hold Assets

The massive trading volumes are exciting, but investors should understand what these products actually do.

A 2x leveraged ETF like SPCH aims to deliver 200% of SpaceX's daily performance. If SPCX rises 5% in a day, SPCH is designed to gain roughly 10%. Inverse funds such as SSPC work the opposite way, targeting -200% of the stock's daily move.

Still, the keyword is daily.

The funds rebalance every day, creating so-called volatility decay. Even if the stock breaks even after a few days, a leveraged ETF holder can still lose money.

For example, if SpaceX rises from $200 to $220 on day one, a $10,000 investment in the stock would be worth $11,000, while a $10,000 investment in a 2X ETF would be worth $12,000.

Let's say the next day the stock drops 15%, down to $187. Stock position is now $9,350, while the 2X ETF erases 30% – the position is now worth $8,400.

A stabilization rally brings the stock up 7% on day 3. The stock goes back to $200.09.

Stock position is around $10,0004.50 – basically at breakeven. A 2X ETF rallies double that amount, moving up 14% from its bruised $8,400 baseline. Yet, even that move brings it up to only $9,576.

Such examples are why leveraged ETFs represent rented exposure. They can be powerful tools for short-term trades, but anyone treating these high-octane products as a simple buy-and-hold bet on SpaceX's future may be stepping into a very expensive lesson.

Image: Shutterstock

SPCHLeverage Shares 2X Long SPCX Daily ETF

$21.60-5.87%

Overview

SPCXSpace Exploration Technologies Corp

$196.50-2.63%

IBITiShares Bitcoin Trust

$37.320.40%

Market News and Data brought to you by Benzinga APIs

To add Benzinga News as your preferred source on Google, click here.