CONL's 85% Loss Exposes Asymmetric Risks of Leveraged ETFs

The GraniteShares 2x Long COIN Daily ETF (NASDAQ:CONL) has lost approximately 85% of its value year-to-date, while Coinbase Global (NASDAQ:COIN) fell by 50%. The fund's design allows it to deliver twice the daily percentage move of Coinbase, which can result in spectacular returns when the stock moves steadily higher. However, this also means that a major correction can quickly turn into a significant loss.

The ETF does not promise twice Coinbase's cumulative return over extended periods but rather targets 200% of its daily percentage move. This distinction is crucial for investors to understand, especially with a stock as volatile as Coinbase. The fund compounds each day's gain or loss from a newly reset base, which can lead to substantial losses even when the underlying stock breaks even.

An $85% loss turns a $10,000 investment into just $1,500, and doubling that amount does not make up for the loss. To recover completely, the remaining investment must gain approximately 567%. This asymmetry is crucial for leveraged ETF investors to understand, as a 50% loss requires a 100% gain, an 85% loss demands 567%, and a 90% loss requires 900%.