The GraniteShares 2x Long COIN Daily ETF (CONL) rose 8% in the past week as bitcoin emerged from a weeks-long slide, then reversed course Thursday, dropping 18%, following a report that CME Group is planning to start bitcoin trading.
Thursday’s news about CME’s potential foray into crypto trading signals Wall Street’s increasing interest in digital assets after the launch of spot bitcoin exchange-traded funds in January.
The single stock ETF, which tracks the fortunes of cryptocurrency exchange giant Coinbase, had swung downward along with the prices of major cryptocurrencies since mid-March, but was up more than 40% this year and over 475% for the past 12 months, as of May 15.
CONL’s massive spike in the past year reflects growing demand for digital asset investments, including service providers to the 15-year-old industry. The Valkyrie Bitcoin Miners ETF (WGMI) has gained over 50% in the past year.
How the CONL ETF Works
CONL’s goal is to deliver twice the return, less fees and expenses, for one day of Coinbase stock. San Francisco-based Coinbase, which was founded in 2012, allows investors to purchase and sell more than 260 cryptocurrencies, including the two largest by market capitalization, bitcoin and ether (the token of the Ethereum blockchain).
While leveraged ETFs amplify an underlying benchmark’s gains, they also amplify its decline, as CONL shareholders experience Thursday.
The publicly traded company is the world’s second largest by trading volume, although dwarfed by Binance, according to cryptocurrency markets data provider CoinMarketCap. Coinbase’s price has mirrored the performance of bitcoin to some extent, rising to an all-time high of $342 per share in 2021 as bitcoin soared to its own record near $69,000, dropping below $36 during an extended crypto bear market but then rising—albeit with a few lulls and dips—as digital assets rebounded.
The recent rise Coinbase and CONL have dovetailed with the latest surge by bitcoin, the world’s largest cryptocurrency by market value and a proxy for wider market performance, which has climbed 7% over the past seven days to trade above $66,000 for the first time in over three weeks.
Spot Bitcoin ETF Approvals
Crypto prices have benefited from the introduction of 11 spot bitcoin ETFs this year following long-sought approval from the Securities and Exchange Commission. Those products now total about $55 billion in assets under management with BlackRock’s iShares Bitcoin Trust (IBIT) drawing more than $18 billion in assets. Coinbase provides custodian services for IBIT and a number of the other new spot bitcoin funds.
It is the target of an SEC lawsuit that accuses the exchange of operating as an unregistered securities exchange, although it has avoided the harsher consequences up to now, as Binance and another high-profile crypto exchange, FTX, have suffered in recent years and that have colored many investors’ opinions of the digital assets industry. In late March, Coinbase lost on much of its motion to dismiss the SEC suit.