Cboe's Leveraged Bitcoin ETF Proposal Triggers Controversy

A leveraged Bitcoin ETF, as proposed by Cboe BZX Exchange, aims to deliver three times the daily performance of Bitcoin. However, this does not mean it triples your gain over the holding period. Instead, it triples the move of a single trading day.

The product resets its position every evening through a process called the daily reset or rebalancing. This means that when the price rises, the fund buys more assets to maintain three times the current exposure. When the price falls, it cuts back on its holdings.

This property is known as path dependence, which means the result of your investment over time depends not only on where the price ends up but also the route it took to get there.