SEC Approves First 3x Leveraged Bitcoin and Ether ETFs in the U.S.
The U.S. Securities and Exchange Commission (SEC) has approved a significant expansion of leveraged crypto exchange-traded products by clearing the first funds designed to deliver three times the daily return of bitcoin and ether futures. On October 2, the SEC approved a rule change by Cboe BZX, allowing Volatility Shares to launch six 3x leveraged ETFs covering bitcoin, ether, and four commodities. The new funds will hold regulated futures contracts tied to bitcoin and ether, rather than the underlying tokens themselves. However, the ETFs cannot begin trading until their registration statement becomes effective.
Analysts have warned that the new products are highly speculative and best suited for short-term traders. The daily reset and leverage structures can cause volatility decay, amplified trading flows, and significant risks for investors. Bloomberg Senior ETF Analyst Eric Balchunas emphasized that leveraged ETFs are for trading, not long-term investing. Blockstream CEO Adam Back noted that automatic re-leveraging strategies can erode capital, especially in sideways-trending markets with high volatility.
The ETFs' structure requires them to reset exposure daily to maintain 3x leverage, which can create mechanical trading flows that amplify market swings. This structure can lead to returns that diverge sharply from the underlying asset's move over several days. Volatility Shares' preliminary prospectus highlights these risks, stating that the 3x Bitcoin ETF is speculative and suitable only for investors able to bear the risk of total loss. The use of futures contracts also adds rollover costs that can weigh on long-term performance.