LeverageShares, a European issuer known for single stock and leveraged trading products, has filed to launch a 2x long ETF that tracks the daily performance of cryptocurrency exchange Kraken.
The filing marks the first attempt to create a leveraged product directly tied to a private crypto exchange, said Eric Balchunas, senior ETF analyst at Bloomberg. The proposed ETF could offer investors twice as much daily price movement as Kraken, which recently secretly filed for an IPO in the United States.
“LeverageShares just filed for a 2x Long Kraken ETF…I don’t think they’ll even IPO until next year. What a country,” Balchunas said. Posted It shared a snapshot of its prospectus with X late Thursday.
Kraken ETF: How does the 2x long leverage ETF work?
Leveraged ETFs like the proposed Kraken product, which aims to amplify the daily returns of the underlying assets, do not have native tokens on crypto exchanges and are not yet listed.
Incorporating insights from LeverageShares’ existing 2X Long Adobe ETF, this investment vehicle provides 200% of the daily performance of Adobe stocks. This traded fund invests at least 80% of its net assets in financial instruments and provides 200% daily exposure to Adobe stock.
The Fund enters into swap agreements with financial institutions to exchange returns calculated based on the notional amount of the underlying shares.
Investors who hold the Fund for more than one day may experience returns that differ materially from the expected 2x performance. For example, if the price of Adobe stock drops significantly, you could lose all of your principal within a day.
Unlike publicly traded stocks, Kraken is a private company and has no publicly traded stock. Because single-stock leveraged ETFs use publicly traded securities for daily pricing, Kraken products are likely to reflect the performance of derivatives and indexes on exchange market activity if they are launched prior to the start of public trading.
In practice, the structure could be similar to a leveraged cryptocurrency ETF, where the underlying asset is a basket of crypto tokens or derivative contracts rather than listed stocks.
Kraken IPO could happen soon
As a cryptopolitan reported Kraken said Wednesday that it has confidentially filed a draft registration statement on Form S-1 with the Securities and Exchange Commission.
The filing pertains to a potential IPO of the exchange’s common stock, but details of the number of shares to be offered and the offering price range have not yet been disclosed. Kraken said the IPO is expected to take place after the SEC completes its review and is subject to market conditions and other factors.
Last Tuesday, Kraken secured $800 million in new funding, including a $200 million investment from Citadel Securities.
The funding round consisted of two parts, with the primary tranche led by Jane Street, DRW Venture Capital, HSG, Oppenheimer Alternative Investment Management, and Tribe Capital. An additional $200 million investment from Citadel Securities brings Kraken’s valuation to $20 billion.
“We have always been focused on building a platform that allows anyone to trade any asset, anytime, anywhere,” Kraken co-CEO Arjun Sethi said in a press conference.
LeverageShares 2x Long ETF Performance
LeverageShares was founded in 2017 and has grown to become Europe’s largest single-share ETP issuer. The firm has launched over 180 products with leveraged and unleveraged exposures to stocks, ETFs, and commodities.
Leverage Shares in September announced 19 new ETPs launched on the London Stock Exchange. This expansion includes 3x leverage products related to Robinhood (HOOD), Hims & Hers (HIMS), and UnitedHealth (UNH), as well as leverage and reverse exposure to global technology companies such as Intel, Broadcom, and ASML.
According to the company’s website, LeverageShares has launched multiple single stock, index, basket and white label ETPs. Index products include 5x long and short FTSE 100 and FTSE MIB ETPs, while basket ETPs listed in September’s lineup included a 3x long FAANG+ product.
Single stock products cover multiple companies in healthcare, high tech, defense and semiconductor manufacturing and feature long 3x UnitedHealth, long 3x Intel, long 3x Broadcom, and corresponding inverse or short products.