Cryptocurrency-related stocks listed on US stock exchanges have been experiencing sharp corrections since the second half of the year. Bitmine Immersion Technologies, a Bitcoin mining and infrastructure company, has seen its stock price fall by approximately 80% from its July high. The T-Rex 2x ETF, classified as a high-risk leveraged product, also plummeted by approximately 86% over the same period.
While stock price trends alone suggest a sharp decline in investor sentiment, the actual market is showing the opposite trend. Korean individual investors are purchasing these stocks and commodities en masse, recording net purchases of approximately $1.4 billion. This represents the second-largest net purchase by Korean individuals in the US stock market, following Alphabet.
This buying spree is interpreted as a further demonstration of the high-risk, high-return nature of Korean individual investors. This suggests a simultaneous perception that short-term declines present opportunities to buy at the bottom, coupled with expectations that a Bitcoin price rebound could maximize leverage, is at play. Notably, investors accustomed to indirect investments through stocks and ETFs, rather than spot Bitcoin, are flocking to highly volatile assets.
However, leveraged ETFs are not only influenced by direction but also by volatility itself, which significantly impacts returns. If prices fluctuate sideways or fluctuate sharply, losses can escalate over long-term holdings. Indeed, the fact that the decline in the T-Rex 2x ETF during this bear market was much greater than that of the underlying asset and related stocks clearly illustrates this structural risk.
Market observers are divided on whether the aggressive buying by Korean individuals signals a future rebound in the virtual asset market or foreshadows another period of increased volatility. Along with Bitcoin price movements, the direction of funds concentrated in high-risk leveraged products is expected to be a key variable in the global stock and virtual asset markets for the foreseeable future.
