My parents used to think of Bitcoin as “imaginary internet money,” but now they are frequently asking me about how they can get involved in the world of digital currency. The recent introduction of a 2x long Coinbase ETF is a prime illustration of how Wall Street acknowledges the interest from traditional equity investors.
For my parents, directly owning cryptocurrency is out of the question and likely the case for many others. However, there’s a clear appetite among investors for Wall Street exposure. Back in 2022, I suggested purchasing the very first Bitcoin ETF (Purpose Bitcoin ETF) and later recommended buying shares of Robinhood in mid-2024.
Both of these trades turned out to be quite lucrative, though the Bitcoin ETF certainly experienced its share of volatility, with more downturns than upswings for an extended period.
As the trend of spot Bitcoin and various altcoin ETFs continues to grow, digital assets are making strides toward becoming more embedded in the financial mainstream. The narrative is shifting. Even more cautious investors, like my parents—both retired and with lower risk appetite—are beginning to consider having greater exposure to cryptocurrency.
This is why I found the debut of the Leverage Shares 2X Long Coinbase ETF (Ticker: COIG), which started trading on Nasdaq this week, particularly interesting. Created by Themes ETFs, COIG aims to deliver double the daily performance of Coinbase stock (COIN), one of the leading players in the U.S. crypto infrastructure market.
It’s not a straightforward wager on the performance of any specific cryptocurrency or the entire market. Instead, it serves as a vehicle to express confidence in Coinbase as the preferred exchange for both retail and institutional crypto investors. The underlying rationale is quite compelling: Coinbase’s revenue increases when more users trade and invest in cryptocurrencies.
Leveraged ETFs like COIG are not your standard long-term holdings. They cater to traders looking to magnify short-term market fluctuations, whether that means capitalizing on a price surge, hedging existing positions, or simply capitalizing on momentum.
As with all leveraged ETFs, these are not meant for a “set it and forget it” investment strategy. Investors who lack an understanding of how daily resets and compounding can affect returns may find themselves frustrated with losses even if the underlying asset makes gradual gains.
To gain deeper insights into COIG’s mechanics, the rationale behind its launch at this moment, and what’s on the horizon, I spoke with the Chief Revenue Officer at Themes ETFs.
Here’s a transcript from our conversation:
The launch of COIG happens as both crypto and equity markets experience a downturn. What gives you confidence that this is the right time to introduce a 2X long Coinbase ETF, especially since the stock is down 25% year-to-date? Are there any specific market trends or shifts in investor behavior that affirm this timing?
We maintain a bullish long-term outlook on Bitcoin and cryptocurrency, believing that Coinbase will benefit as one of the largest and most secure platforms available. COIN experiences substantial interest and volume, and the decision to launch COIG was not about trying to time a market upswing but rather about providing retail and professional traders with an opportunity to gain leverage through a daily liquid ETF wrapper.
How should a leveraged product like COIG fit into an investor’s overall portfolio? What should traders anticipate during times of rapid price fluctuations (up or down) in Coinbase stock, and how should it be integrated with core long-term positions?
For active investors looking to add leverage to their Coinbase exposure, COIG offers a straightforward option without the need for margin calls or options trading. The objective is to achieve 200% of the daily performance of COIN. Due to the daily reset structure of leveraged ETFs, we do not recommend holding them over long periods; instead, they should be employed tactically when anticipating significant moves or to hedge short positions.
While Coinbase stock benefits from increased cryptocurrency adoption, this adoption does not always align with Bitcoin’s price movements. How should investors interpret the correlation between COIG and larger crypto market trends?
As cryptocurrency adoption grows in the U.S. and globally, COIN should benefit as one of the premier platforms. We don’t view it as a direct correlation with Bitcoin, but we believe that as Bitcoin flourishes, it will also elevate the entire crypto market. Overall, we remain optimistic about the long-term trajectory for both cryptocurrency and Coinbase.
Leveraged ETFs can be exciting, yet many investors struggle with the underlying mathematics. Given daily compounding, a 2X fund may lose value if the underlying stock remains relatively stable. What essential risks should investors be aware of before trading COIG (or any 2X fund)?
Every investment carries risks, and we encourage all investors to thoroughly understand the instruments and underlying assets they are dealing with before starting to trade. In simple terms, while leverage offers more upside potential, it also increases the risk of downside losses if the underlying stock declines. A “set it and forget it” strategy is not advisable with these instruments. Furthermore, due to the daily reset feature, traders could lose capital in a volatile or stagnant market.
The prospectus indicates that these funds are designed for “knowledgeable investors.” What qualifications define someone as a “knowledgeable” investor?
We believe it is crucial for all investors and traders to grasp what they are investing in and the associated risks.
We’re seeing a growing inclination among institutional investors toward cryptocurrency, with many (even my parents) increasing their allocations. A number of them prefer to utilize more familiar instruments like equities and ETFs instead of holding crypto directly. How is this trend shaping the crypto ETF landscape, and do you view your COIG product as a competitor to direct crypto investments?
COIG is a leveraged ETF, featuring an underlying security connected to cryptocurrency. However, it’s not a “crypto” investment in the same way a spot bitcoin ETF is, nor does it involve holding the actual coins. It merely provides a way to achieve 2x exposure to Coinbase, whether prices go up or down, within a daily liquid ETF structure. Coinbase serves as a proxy for cryptocurrency and Bitcoin.
How is Themes ETFs distinguishing itself and positioning its offerings in the leveraged ETF market? Notably, the expense ratio is set at 0.75%, making it one of the more affordable ETFs of its type. What other benefits does Themes provide, whether in terms of structure or strategy, that would encourage investors to choose COIG over alternatives?
The expertise of our management team and the low fees are significant differentiators. We’re beginning to observe increasing daily volumes and trader interest as more individuals realize that there is a trustworthy alternative available at a better cost.
What can you share about the future roadmap and product pipeline for Themes ETFs regarding cryptocurrency? Are there other themes or sectors within the crypto space you are planning to explore?
The ETF market is dynamic, and we are continuously looking to offer innovative and first-to-market products that resonate with traders and investors. We have plans for additional crypto-related offerings that will be announced soon.