SEC Approves 3x Ethereum ETF, But ETF Flows Remain Unimpressed
The U.S. Securities and Exchange Commission (SEC) approved a new 3x Ethereum ETF, known as Volatility Shares, on October 2nd. This approval allows the ETF to amplify positive and negative price movements in Ethereum futures by up to three times. However, this product is unleveraged and has daily reset, which means that returns can diverge sharply from three times ETH's longer-term performance.
Despite the approval, the ETF flows didn't seem impressed. In fact, the data recorded more outflows on the product, with a four-day reversal that removed $155 million after September's inflow streak. This suggests that investors have not shifted towards ETH exposure despite the leveraged route.
ETF assets were also affected, dropping from $17.92 billion on the 22nd of September to $17.46 billion, shedding a whopping $460 million. This is a concern because high turnover is not translating into demand. The 3x approval has yet to improve institutional flows, leaving ETH more dependent on spot and derivatives demand and potentially increasing sensitivity to redemptions.
Despite the massive outflows, ETH's price held above $2,700, showing resilient underlying demand. However, buyers have struggled to turn this defense into a sustaining breakout, and the price remains trapped in a range.