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Coinbase's stock surge following Trump election win leads to a massive day for a leveraged ETF counterpart

Coinbase's stock surge following Trump election win leads to a massive day for a leveraged ETF counterpart

The BlockThe Block2024/11/06 16:00
By:The Block

Quick Take Coinbase’s stock surged more than 30% in Wednesday’s session and a leveraged ETF tied to the stock doubled that performance. Leveraged ETFs are typically meant to be short-term plays for experienced traders because of the high risk involved.

Coinbase's stock surge following Trump election win leads to a massive day for a leveraged ETF counterpart image 0

U.S. market indices closed Wednesday at all-time highs following Donald Trump’s victory over Vice President Kamala Harris in the U.S. presidential election. Shares of Coinbase (ticker: COIN) surged more than 30% in the trading session, closing the day near year-to-date highs, but one volatile ETF did twice as well.

The GraniteShares 2x Long COIN Daily ETF (CONL) closed the session up 62%, possibly setting a record one-day return for an ETF, according to Bloomberg ETF analyst Eric Balchunas.

"It also traded about $1b and now has close to $1b in assets," Balchunas said in a post on X . "Another hot sauce hit from GraniteShares who recently struck gold w $NVDL (now $6b). What a country."

A leveraged exchange-traded fund uses financial derivatives and debt to amplify the daily returns of an underlying security. Traditional ETFs typically track the securities in their underlying index on a one-to-one basis, while a leveraged fund may aim for a 2:1 (or higher) ratio. These funds are typically meant to be short-term plays for experienced traders because of the high risk involved. This has led Blachunas and other industry experts to call these crypto-tied ETFs "ghost pepper" or "hot sauce" funds.

"We definitely think there is a demand for it," Tuttle Capital CEO Matt Tuttle said earlier this summer. "There's a whole bunch of degens out there who love to trade this stuff."

Wednesday's moves came on a big day for both the stock indices and cryptocurrencies, which saw the price of bitcoin hit a new all-time high above the 75,000 level. In fact, 16 of the top exchange-traded funds saw one-day trading flows of $22 billion, which Balchunas said is usually a good week for the funds.

"A Trump-inspired gusher of cash is flowing into risk-on ETFs," he said in a separate post on X . "YTD net flows now +$856b, (55b away from a record) and the rolling 1yr has passed $1T (have a feeling the "T" will be there for a while)."

The 12 spot bitcoin ETFs, most of which debuted in January, traded over $6 billion on Wednesday. This marked their highest daily total since March 14.

For its part, Coinbase said on Oct. 30 that its board of directors had authorized a $1 billion share repurchase program. The crypto exchange ended the third quarter with $8.2 billion in USD resources, an increase of $417 million from the previous quarter. CEO Brian Armstrong also weighed in on Trump's victory.

"DC received a clear message that being anti-crypto is a good way to end your career, as it doesn't represent the will of the voters, who are disaffected by the current financial system and want change," Armstrong said Wednesday on X.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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