Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
The cryptocurrency market has always been volatile*. As we enter 2025 under a new Trump administration, though, the stakes seem to be rising. Believers in blockchain’s disruptive potential are looking for another bull run fueled by potentially lighter regulation and rising adoption. On the other side, traders skeptical of its staying power think crypto is due for a market reset amid the hype.
Direxion offers Leveraged and Inverse ETFs that allow traders to take positions on short-term swings in stocks with a crypto component. These ETFs provide exposure to equities, not actual cryptocurrencies like Bitcoin.
Below is a daily chart of the Solactive Distributed Ledger & Decentralized Payment Tech Index*, as of January 23, 2025. The benchmark includes U.S.-listed stocks of companies engaged in distributed ledger or decentralized payment technologies.
Source: Solactive, January 23, 2025.
The performance data quoted represents past performance. Past performance does not guarantee future results. One cannot invest directly in an index.
First, let’s explore the bull and bear cases for crypto in this new political and economic environment.
The Bull Case: Crypto’s Comeback?
Supporters of a bullish crypto outlook argue that the Trump administration’s policies could reignite enthusiasm for blockchain innovation. Here’s why they’re optimistic:
- Friendlier Regulation: The Trump administration has signaled interest in revisiting regulations around crypto and blockchain. SEC chair and vocal crypto critic Gary Gensler resigned his post when President Donald Trump took office. Republican Commissioner Mark Uyeda, who has been named acting SEC chair, recently announced a task force to develop a regulatory framework for crypto assets, Reuters reports.
- Institutional Adoption: There’s hope that streamlined policies could attract institutional investment, fueling demand for digital assets. From major banks to Fortune 500 companies, institutional adoption continues to rise. This could lend legitimacy to the sector, bringing more stability and long-term growth potential.
- The Bitcoin Halving Ripple Effect: Following Bitcoin’s 2024 halving, historical trends suggest that the supply shock may still drive upward price momentum into 2025. Past halvings have often seen delayed effects, with bull runs occurring 12-18 months afterward as reduced supply meets increasing demand. The question now is whether 2025 will see a similar rally—or if macroeconomic factors override this historical pattern. Bitcoin recently cleared $100,000 for the first time.
- De-Dollarization Narrative: As global tensions around reserve currencies persist, cryptocurrencies like Bitcoin and Ethereum could gain traction as digital alternatives.
The Bear Case: Bubble Trouble?
On the flip side, skeptics argue that crypto faces significant headwinds that could weigh down the market amid signs of froth:
- Regulatory Crackdowns: While regulatory clarity is a possibility, there’s also the risk of stricter enforcement, as Mark Uyeda is a new player. The SEC’s ongoing involvement in crypto exchanges and tokens could limit growth and give investors’ pause.
- Economic Uncertainty: If interest-rate and economic-policy developments under Trump shift in favor of traditional financial markets that could make speculative assets like crypto less attractive, compared to traditional investments.
- Environmental Criticism: The environmental impact of crypto mining continues to attract negative attention, with some governments and corporations distancing themselves from the sector.
- Market Exhaustion: After years of speculative mania, some analysts argue that the crypto market could be experiencing “bubble fatigue,” with many retail traders burned by previous downturns. Indeed, President Trump is already facing criticism from the crypto community for launching a meme-coin right before the inauguration, BBC reports.
Trading Crypto Long or Short
Traders who have positive views on the crypto space might consider the Direxion Daily Crypto Industry Bull 2X Shares (Ticker: LMBO), which seeks daily investment results, before fees and expenses, of 200% of the performance of the Solactive Distributed Ledger & Decentralized Payment Tech Index. On the other hand, bears can express their views with the Direxion Daily Crypto Industry Bear 1X Shares (Ticker: REKT). This is an inverse ETF that seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of the Solactive Distributed Ledger & Decentralized Payment Tech Index.
With Direxion’s leveraged and inverse crypto ETFs, traders have powerful tools to express their views on crypto’s future, whether bullish or bearish. The Trump administration’s policies, global economic shifts, and the evolving crypto landscape make this an exciting—and uncertain—time for traders.
Originally published February 11, 2025.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.
The Solactive Distributed Ledger & Decentralized Payment Tech Index (SOLDLDPT) seeks to track the performance of US-listed securities that have business operations in the field of distributed ledger or decentralized payment technology, which includes the following business fields: blockchain technology, non-fungible tokens, decentralized finance, and digital asset mining hardware. One cannot invest directly in an index.
Solactive AG is not a sponsor of, or in any way affiliated with, the Direxion Daily Crypto Industry Bull 2X Shares or Direxion Daily Crypto Industry Bear 1X Shares.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. A Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with the Index and may increase the volatility of the Fund.
Daily Index Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.
Daily Inverse Index Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse leveraged investment objective. The Bear Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.
Crypto Industry Investing Risk — Companies in the crypto industry are subject to various risks, including the inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations.
Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs.
Financials Sector Risk — Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, Passive Investment and Index Performance Risk and for the Direxion Daily Crypto Industry Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.
Disclosure Information
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. Click here to obtain a Fund’s prospectus and summary prospectus or call 866-476-7523. A Fund’s prospectus and summary prospectus should be read carefully before investing.
Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.
Direxion Funds Risks — An investment in the Funds involves risk, including the possible loss of principal. The Funds are non-diversified and include risks associated with concentration risk which results from the Funds’ investments in a particular industry or sector and can increase volatility over time. Active and frequent trading associated with a regular rebalance of a fund can cause the price to fluctuate, therefore impacting its performance compared to other investment vehicles. For other risks including correlation, compounding, market volatility and risks specific to an industry or sector, please read the prospectus.
Direxion Shares ETF Risks — An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from an ETF’s investments in a particular industry, sector or company, which can increase volatility. The leveraged and inverse ETF utilize derivatives, such as futures contracts and swaps which are subject to market risks that may cause their price to fluctuate over time. The leveraged and inverse ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index or underlying security for periods other than a single day. The leveraged and inverse ETFs may also subject to leverage, correlation, daily compounding, market volatility and risks specific to an industry, sector or company. The non-leveraged ETFs are subject to certain risks, including imperfect index correlation and market price variance, which may decrease performance. The non-leveraged ETFs may invest in a relatively small number of issuers and, as a result, be subject to greater risk of loss with respect to its portfolio securities. The non-leveraged ETFs may experience greater fluctuation in its net asset value as compared to other investments. The non-leveraged ETFs may be appropriate for investors with a long-term investment time horizon, who primarily seek capital growth, and who are able to tolerate periods of prolonged price declines. Please read each ETF’s prospectus for a more complete description of the investment risks. There is no guarantee that an ETF will achieve its investment objective.
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