DRUG Enhances Buzz for Psilocybin, Psychedelic ETFs

Bright Minds Biosciences (DRUG) shares skyrocketed 2,500% Tuesday, sending the AdvisorShares Psychedelics ETF (PSIL), which includes DRUG as a top holding, 99% higher. 

Are investors high on psychedelic stocks again or tripping over nothing? 

Bloomberg Senior ETF Analyst, Eric Balchunas, remarked in an X post that DRUG’s weighting in PSIL went from 3% to 60% in one day, noting that it may be an “all-time record for a one-day weight change in an ETF.” 

What makes the dramatic increase trippy is that there were no major announcements or breakthroughs coming from the company that would typically explain such a rise. This suggests that speculative trading amid heightened interest in the psychedelic biotech sector may have driven the surge. 

Without major developments, DRUG traded over 100 million shares in a day. This kind of movement often indicates short squeezes, where investors betting against a stock must buy shares as prices rise rapidly. 

DRUG and PSIL were both down as much as 25% by midday Wednesday. 

Bright Minds develops psychedelic and serotonin-based treatments for neurological and psychiatric disorders. 

Psychedelic ETFs: What’s the Buzz All About? 

Psychedelic ETFs are exchange-traded funds that focus on companies involved in the research, development, and commercialization of psychedelic drugs for medical and therapeutic uses. These companies work on treatments targeting mental health disorders such as depression, PTSD, anxiety, and addiction using substances like psilocybin (from magic mushrooms), MDMA, LSD, and DMT.

Psychedelic ETFs offer investors diversified exposure to this emerging sector without having to invest in individual companies. 

Top Psychedelic ETFs

Defiance Next Gen Altered Experience ETF (PSY): The first psychedelic ETF, PSY debuted in May of 2021 but was liquidated on Aug. 30, 2022.  

Horizons Psychedelic Stock Index ETF (PSYK): This ETF invests in North American companies involved in the development of psychedelic therapies and medicines. 

AdvisorShares Psychedelics ETF (PSIL): This actively managed ETF invests in companies advancing psychedelic research for medical purposes. 

Top Psychedelic Stocks

• Compass Pathways (CMPS): A leader in psilocybin-based treatments for mental health disorders. 
• Mind Medicine (MNMD): A developer of therapies for anxiety and addiction using LSD and psilocybin. 
• Atai Life Sciences (ATAI): A biopharmaceutical company working on various psychedelics-based treatments for mental health. 
• Cybin (CYBN): A researcher of various psychedelic compounds to treat depression and anxiety. 
• Field Trip Health (FTRP): A psychedelic-assisted therapy company providing ketamine-assisted treatments. 
• Numinus Wellness (NUMI): A provider of evidence-based psychedelic-assisted therapies. 
• Seelos Therapeutics (SEEL): A developer of g therapies that use ketamine for neurological and psychiatric conditions. 

Psychedelic ETFs, Psilocybin Appeal

Investors in psychedelic ETFs are often drawn by the potential growth of the psychedelic drug market, most notably in the psilocybin space, which is expected to grow significantly, pending regulatory approval and medical research advances. The market for mental health treatments is vast, and with the increasing acceptance of psychedelic therapies, these companies may benefit from rising demand. 

Investors should remain cautious as the biotech sub-sector remains highly speculative, with regulatory uncertainties and the experimental nature of many treatments posing risks. Therefore, psychedelic ETFs provide a way to spread risk across multiple companies rather than betting on individual stocks.