Valour's Leveraged ETP Launch Highlights Growth Efforts Amid DeFi Technologies' Persistent Financial Strains

What happened

DeFi Technologies' subsidiary Valour Inc. has launched new constant leveraged Bitcoin and Ethereum ETPs on Sweden's Spotlight Stock Market, offering 2x daily exposure with a 1.9% management fee. These products, named Bull Bitcoin X2 and Bull Ethereum X2, target Nordic investors seeking amplified crypto access without direct wallet management, building on regional familiarity with similar instruments. This move aligns with Valour's recent expansion, such as securing approval for a Solana ETP in Brazil, as part of a strategy to grow assets under management and fee-based revenue. However, DeFi Technologies' financial health remains severely challenged, with volatile earnings driven by fair-value marks, persistently negative free cash flow, and a leveraged balance sheet where liabilities approach 90% of assets. The launch may incrementally boost AUM and fees but does not address core weaknesses like cash burn and reliance on external funding in a competitive, regulatory-sensitive market.

Implication

For investors, this news highlights management's focus on scaling Valour's ETP business, which could support watch items related to AUM growth and recurring revenue potential. However, the company's overall economics remain dominated by volatile fair-value marks and negative cash generation, limiting the impact on equity value. The leveraged nature of the new ETPs may attract speculative capital but increases exposure to crypto market swings, reinforcing DEFT's role as a high-beta proxy. Without evidence of sustained positive operating cash flow or improved interest coverage, the investment case stays speculative and unsuitable for risk-averse investors. Monitoring should continue on AUM trends, but the STRONG SELL thesis holds until fundamental profitability and balance sheet stability are demonstrated.

Thesis delta

The launch of leveraged ETPs is consistent with Valour's asset-gathering strategy and could support incremental fee growth, aligning with watch items for AUM expansion. However, it does not materially alter the assessment of DeFi Technologies as a leveraged proxy on crypto cycles with poor cash flow, high leverage, and no clear moat. Thus, the STRONG SELL recommendation remains unchanged, pending future financial improvements that address core vulnerabilities.