Korean retail investors trading U.S. stocks who focused their bets on coin-related shares have been crestfallen amid a down market that has continued since last year. Related stocks have plunged as the market for crypto assets such as bitcoin has remained weak. Recently, there was even a case of a coin exchange-traded fund (ETF) being liquidated.
According to the financial investment industry on the 6th, the price of bitcoin has fallen more than 40% from last year's peak. Lately, weakness has continued as global economic uncertainty stemming from the Middle East war has come to the fore.
Coin-related stocks have shown even greater volatility. In fact, the share price of Strategy (formerly MicroStrategy), the world's largest bitcoin-holding corporations, which was above $450 in July last year, tumbled more than 70% to below the $120 level on the 2nd, the previous trading day.
Marathon Digital Holdings (-62%), Riot Platforms (-44%), and GameStop (-16%) also recorded steep declines from their peaks over the same period.
Because coin-related stocks are among the main targets for Korean retail investors trading U.S. stocks, their mark-to-market losses likely widened. According to the Korea Securities Depository (KSD), as of the 1st, Bitmain Immersion Technologies, the No. 1 corporations in ether holdings (about 1.1452 trillion won), and Strategy (about 867.8 billion won) ranked 30th and 42nd, respectively, among U.S. stocks held by Korean retail investors trading U.S. stocks.
There has also been a case of a related ETF being delisted. The U.S.-listed ETF "REX Bitcoin Corporate Treasury Convertible Bond ETF" (BMAX) will be liquidated on the 21st. BMAX focuses on convertible bonds of corporations that hold bitcoin, with about 60% allocated to Strategy's convertible bonds.
REX Shares, the global asset manager that runs the ETF, recently said, "The advisor determined that, despite ongoing operating expense for BMAX, the potential for asset growth is limited," and noted that trading will be halted after the 13th of this month.
When BMAX launched in Mar. last year, it drew market interest because, given the nature of convertible bonds, it could secure stability like a bond when share prices fell and seek gains by converting to stock when share prices rose. However, as the share prices of its holdings plunged starting last year, the value of the convertible bonds also dropped sharply. BMAX's net worth, which was $25.5 million (about 38.4 billion won) at the end of Mar. last year, had shrunk to $5.9 million (8.9 billion won) as of the 2nd of this month, about one-quarter the size. The ETF's price also fell more than 20% over the past six months.
Even so, investors have continued to buy related stocks and leveraged ETFs on expectations of a rebound in coin prices. Over the past month (Mar. 3–Apr. 2), domestic investors made a net purchase of 79.7 billion won in Strategy and 30.5 billion won in the "T-Rex 2X Long MSTR Daily Target ETF," which tracks Strategy's share price at twice the rate. They ranked 17th and 47th, respectively, by net purchases.
In addition, investors also bought heavily into Bitmain Immersion Technologies (96.3 billion won, 13th) and the "GRNTSHR 2X ETF" (33.9 billion won, 42nd), which tracks Coinbase at 2x.
The securities industry said coin prices could remain weak for the time being because Middle East risks still linger.
Yang Hyun-kyung, an analyst at iM Securities, said, "For now, there are limited clear catalysts to drive a trend rise in bitcoin," adding, "We need to approach the market with changes in oil prices and the path of currency policy due to a prolonged war as the key variables."