Crypto Fervor Is Growing, But Some Remain Cautious – Place Your Bets Either Way With LMBO Or REKT

For many crypto enthusiasts, Donald Trump’s re-election as president of the United States is a watershed moment for the cryptocurrency industry, given his stated proposals. For them, the Trump administration represents a promise of regulator clarity; an element that they may argue was absent in the previous administration.

Trump 2.0 Expected To Bring Crypto To The Forefront

Beginning with financial oversight, Trump has appointed former Securities and Exchange Commissioner Paul S. Atkins to lead the agency once more. Atkins replaced the outgoing commissioner, Gary Gensler, a noted critic and perceived adversary of the cryptocurrency industry.

From a policy standpoint, two critical bills, the Financial Innovation and Technology for the 21st Century Act (FIT21) and the Bitcoin Strategic Reserve Act, look poised to transform the cryptocurrency landscape.

FIT21 seeks to establish a clear regulatory framework for digital assets by classifying tokens as digital assets or commodities. The main feature of this bill is that it bifurcates regulatory oversight between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), where the former must regulate a digital asset as a commodity if the blockchain, or digital ledger, on which it runs is functional and decentralized. Conversely, the latter will regulate a digital asset as a security if its associated blockchain is functional but not decentralized.

Furthermore, as President Trump mentioned during his campaigning, the Bitcoin Strategic Reserve Act could potentially establish a national reserve for Bitcoin, boosting its legitimacy and global recognition. If passed, it could encourage other nations to adopt similar policies. Submitted to Congress on July 31, 2024, and currently under Senate Banking Committee review, Trump seems well-positioned to advance this bill. Several U.S. states have also proposed Bitcoin reserve legislation, signaling that Bitcoin as a strategic reserve may become a reality in 2025.

With the Republican party having a majority in Congress, albeit small, it is anticipated by many that there will be little resistance to passing the above-mentioned bills or enacting any policy President Trump deems necessary to his agenda.

Finally, under the new Trump administration, relaxed application of the Howey Test – a framework set by the U.S. Supreme Court to determine whether a transaction qualifies as an investment contract and therefore be considered a security – by the SEC could increase approvals for spot crypto ETFs and public listings of crypto companies.

Voices Of Caution

At the same time, it's always important to maintain caution, and respected publications have in the past warned about shifts from rags to riches back to rags often occurring within a matter of weeks. Thus far, the hope of potential changes in cryptocurrency regulation has led to a rally in prices for various cryptocurrencies but has also opened the door for opportunism. Preceding his inauguration, President Trump and his wife launched meme coins – cryptocurrencies often inspired by internet memes or trends – a move some industry onlookers view as a cash grab, which undermines the legitimacy of digital assets in the public sphere. 

The increasing sentiment towards cryptocurrencies following the November 2024 election has resulted in Bitcoin and other cryptocurrencies rising based on the expectation of regulatory change; however, if said change does not materialize, a broad market sell-off is also possible. Of President Trump’s flurry of executive orders and proclamations on inauguration day, none pertained to cryptocurrency regulation. With momentum building around cryptocurrency policy, if it does not materialize meaningfully, there is a growing possibility of a correction. Geoff Kendrick, global head of Digital Assets Research at Standard Chartered Bank, noted the possibility of a 10-20% sell-off if no meaningful policy change is implemented. 

Gaining Comprehensive Exposure To The Crypto Industry With Direxion

For investors looking to gain comprehensive exposure to the crypto industry, Direxion's Daily Crypto Industry Bull 2X and Bear 1X Shares – LMBO and REKT, respectively – offer enhanced, pure-play exposure to U.S.-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. These leveraged ETFs are designed to emulate the daily performance of the Solactive Distributed Ledger & Decentralized Payment Tech Index, enabling investors to gain exposure to the index's movements with returns of 300% on its rise or 100% of the inverse. It is important to note that these solutions are intended to take advantage of short-term trends and should not be held for more than a day.

Whether bullish or bearish on the crypto industry, these ETFs can help traders easily engage with the industry's growth patterns. However, it’s crucial to approach these leveraged products with a clear understanding of their risks. While the amplified exposure can translate to significant gains, it can also lead to substantial losses. These ETFs are best suited for those who can actively manage the inherent risks of leverage and are looking to capitalize on short-term trends occurring with the firm.

Learn more about both ETFs on Direxion's website here.

Featured photo by Traxer on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.

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.

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