Direxion's Crypto-Focused LMBO And REKT ETFs Offer Contrasting Ways To Play The Blockchain

One of the top reasons investors have gravitated toward cryptocurrency-related assets is the enormous upside potential. On the front-facing side of the blockchain ecosystem, the total value of all virtual currencies was around $1.99 trillion one year ago. Fast-forward to the present, and this metric is up at $3.14 trillion, or an expansion of almost 60%.

Of course, individual cryptos – particularly the meme coins – have witnessed exponentially explosive swings over the past 52 weeks. Thanks to a potent combo of wide proliferation and extreme speculation, digital assets have become increasingly integrated into mainstream society. Helping lift the narrative is the dramatic growth in the number of digital coins and tokens in circulation. In 2013, there were about 66 digital assets. Today, the number has exceeded 10,000.

However, it's important to note that it's not just blind speculation that drives the cryptocurrency ecosystem. According to data from Bank of America Private Bank, among wealthy millennials who identify as conservative investors, a surprisingly large number have allocated their wealth to cryptos. On average, this cohort holds 17% of their portfolio in digital assets, potentially representing a generational paradigm shift in risk management.

Even personal finance gurus like Suze Orman have gotten into the crypto game, urging her followers to consider exposure to major blockchain assets. Still, while the decentralized digital economy has come a long way, it's not without its critics.

One major concern about cryptocurrencies is their inherent volatility. Double-digit percentage swings in either direction are rather commonplace in the blockchain sphere. While long-side speculators don't complain during the impressive rips, the sudden collapse in market value can be devastating for investors caught out at the wrong time.

Another criticism of the crypto space is its lack of fundamental predictability. While traditional safe havens like gold have performed relatively well during the current inflationary cycle, the crypto sector has lagged behind such assets. Nevertheless, the one positive here is that the dynamic narratives offer trading opportunities for contrarians on both sides of the aisle.

The Direxion ETFs: This framework presents a natural segue into financial service firm Direxion's crypto-focused exchange-traded funds. For the optimists, the Direxion Daily Crypto Industry Bull 2X Shares LMBO brings to the table a leveraged financial vehicle. On the other hand, pessimists may target the Direxion Daily Crypto Industry Bear 1X Shares REKT.

Both LMBO and REKT base their daily investment results on the performance of the Solactive Distributed Ledger & Decentralized Payment Tech Index. LMBO aims to achieve 200% of the performance of the benchmark while REKT seeks 100% of the inverse performance. These special ETFs allow everyday investors access to leveraged or bearish trades without resorting to options.

However, the major caveat is that both ETFs are designed for short-term exposure only: essentially, no longer than one trading session. Positions held for longer may see their performance "de-track" from the benchmark due to the compounding effect of volatility.

The LMBO ETF: Thanks to the proliferation of digital assets, the LMBO ETF has been a steady performer, gaining almost 16% over the past one-year period.

• So far, LMBO stands on reasonably solid technical ground, with the price action above its 50 and 200-day moving averages.
• Interestingly, LMBO is currently charting a sideways triangle shape with its upper and lower boundaries, potentially signaling a breakout move.

The REKT ETF: Not surprisingly given the broad interest in the crypto ecosystem, the REKT ETF has performed poorly, losing almost 17% in the past 52 weeks.

• While the bear fund's price action isn't the worst thing in the world, the 50 and 200 DMAs consistently act as upside resistance.
• One factor to watch out for regarding REKT is the low volume. Plus, with LMBO signaling possible upside, REKT traders face a tough outlook.

Featured photo by WorldSpectrum on Pixabay.