Dividend yield said to be 160%… Coin ETF down 40%

Son Min

Summary

It reported that purchases by Korean retail investors are concentrated on cryptocurrency-related ETFs with annual dividend yields reaching 150~160%.
It stated that these ETFs have a structure that can sell principal to provide high dividends, so the upside in returns is limited.
It reported that despite large stock price gains, high-dividend ETF returns have fallen by more than 40%, prompting securities firms to say they are not suitable for long-term investment.

Cryptocurrency-related exchange-traded funds (ETFs) with annual dividend yields exceeding 100% have emerged one after another. It was found that Korean retail investors have been buying them intensively.

On the 2nd, according to data from the Korea Securities Depository, Korean retail investors bought about $80 million worth of the 'YieldMax Coin Option Income Strategy' (ticker CONY) ETF over the past month, and $62 million and $58 million worth of the 'YieldMax MSTR Option Income Strategy' (MSTY) and 'ProShares Bitcoin' (BITO), respectively. All were among the top 20 in net purchases.

CONY is characterized by employing a covered-call strategy on Coinbase, the largest U.S. cryptocurrency exchange, while MSTY employs a covered-call strategy on MicroStrategy, a Bitcoin investment firm. BITO is a product that invests in Bitcoin futures. In particular, the annual dividend rates for CONY and MSTY are as high as 150~160%.

However, since they earn profits by selling call options and the structure can sell principal to provide high dividends, the upside in returns is limited. Even though the stock prices of Coinbase and MicroStrategy have risen more than 22% and 15%, respectively, since the beginning of the year, the high-dividend ETFs' returns have fallen by more than 40%. Securities industry analysts point out that they are not suitable for long-term investment as they are more vulnerable in periods of stock price declines.

Jae-hong Jeong, Korea Economic TV reporter

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