GraniteShares 1x Short COIN Daily ETF (CONI)

ETF GraniteShares 1x Short COIN Daily ETF (SCON)

Profile

Focus: SCON is an inverse exchange-traded fund (ETF) that seeks to offer daily investment results that are -100% of the performance of the Coinbase, Inc. (COIN) stock price.

Asset allocation: SCON invests in a basket of financial instruments, including swap agreements and other derivatives, designed to track the inverse performance of COIN.

Investment strategy: SCON uses a shorting strategy to profit from a decline in the price of COIN stock. When COIN's price falls, SCON's value is expected to rise. Conversely, when COIN's price rises, SCON's value is expected to fall.

Objective

The primary objective of SCON is to provide investors with a way to gain exposure to the downside potential of COIN stock. This ETF is suitable for investors who believe that COIN's stock price will decline in the near term.

Issuer

GraniteShares:

• Reputation and Reliability: GraniteShares is a relatively new asset management company founded in 2016. However, it is backed by experienced industry professionals and has a growing track record of innovative ETF products.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in derivatives and quantitative analysis.

Market Share

SCON is a relatively small ETF within the Short & Leveraged category, with a market share of less than 1%.

Total Net Assets

As of November 9, 2023, SCON has approximately $10 million in total net assets.

Moat

Unique strategy: SCON offers a unique and targeted approach to shorting COIN stock, specifically focusing on daily inverse performance.

Experienced management: The ETF's management team has a strong understanding of derivatives and quantitative analysis, which is crucial for managing a shorting strategy.

Niche market focus: SCON caters to a specific group of investors seeking short exposure to COIN, providing a differentiated product in the market.

Financial Performance

Historical Performance: SCON has generated positive returns since its inception in March 2023, reflecting the decline in COIN's stock price during that period. However, past performance is not indicative of future results.

Benchmark Comparison: SCON's performance is measured against the COIN stock price, aiming to achieve a daily return of -100% of COIN's movement.

Growth Trajectory

The growth trajectory of SCON is highly dependent on the future performance of COIN's stock price. If COIN's price continues to decline, SCON is expected to benefit. Conversely, if COIN's price rebounds, SCON's value will likely decline.

Liquidity

Average Trading Volume: SCON's average trading volume is relatively low, indicating lower liquidity compared to larger ETFs.

Bid-Ask Spread: The bid-ask spread for SCON is typically narrow, suggesting efficient trading with minimal price difference between buyers and sellers.

Market Dynamics

Factors affecting SCON's market environment include:

• Coinbase's business performance: The performance of Coinbase's business significantly impacts its stock price and, consequently, SCON's performance.
• Overall cryptocurrency market sentiment: The broader cryptocurrency market sentiment can influence the price of COIN stock and, in turn, the performance of SCON.
• Regulatory environment: Changes in regulations surrounding cryptocurrencies could impact the price of COIN stock and the demand for SCON.

Competitors

Key competitors in the Short & Leveraged category with similar strategies include:

• ProShares Short QQQ (PSQ)
• Direxion Daily S&P 500 Bear 1X Shares (SPDN)
• ProShares UltraPro Short QQQ (SQQQ)

Expense Ratio

SCON's expense ratio is 0.95%, which includes management fees and other operational costs.

Investment Approach and Strategy

Strategy: SCON utilizes a shorting strategy through swap agreements and other derivatives to achieve its inverse performance goal.

Composition: The ETF primarily invests in financial instruments linked to COIN's stock price, aiming to generate returns opposite to COIN's performance.

Key Points

• SCON offers a targeted approach to shorting COIN stock with a daily inverse performance objective.
• The ETF is suitable for investors who believe COIN's stock price will decline.
• SCON's performance is highly dependent on COIN's stock price movement.
• The ETF has a relatively low average trading volume but a narrow bid-ask spread.

Risks

• Volatility: SCON is expected to be more volatile than traditional long-only ETFs due to the use of leverage and shorting strategy.
• Market Risk: SCON's performance is directly tied to the performance of COIN stock, which is subject to market risks specific to the cryptocurrency industry.
• Counterparty Risk: The ETF relies on swap agreements and other derivatives, which involve counterparty risk, where the counterparty may fail to fulfill its obligations.

Who Should Consider Investing

SCON is suitable for sophisticated investors who:

• Have a strong understanding of shorting strategies and derivatives.
• Have a high tolerance for risk and volatility.
• Believe that COIN's stock price will decline in the near term.

Fundamental Rating Based on AI

Based on an AI-based evaluation of SCON's fundamentals, including financial health, market position, and future prospects, the ETF receives a rating of 6.5 out of 10. This rating reflects the ETF's unique strategy, experienced management, and niche market focus, but also acknowledges its volatility and market risk.

Resources and Disclaimers

• GraniteShares website: https://graniteshares.com/us/etfs/scon/
• Coinbase Investor Relations: https://investor.coinbase.com/

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial professional before making any investment decisions.