The U.S. Securities and Exchange Commission on Oct. 2 approved a Cboe BZX rule change that clears the way for six ETFs issued by Volatility Shares. Some of the products are designed to deliver three times, or 3x, the daily return of bitcoin and ether, while the broader lineup also includes funds linked to gold, silver, crude oil and natural gas.
The move marks a notable step for the U.S. crypto market because leveraged crypto funds had previously been capped at 2x. The products still cannot begin trading, however, because the issuer must first have its registration statement declared effective by the SEC, and the order does not set a deadline.
The funds will not hold actual bitcoin or ether tokens. Instead, they will use regulated futures tied to those assets. Market participants say that makes them trading tools rather than long-term investment vehicles. Bloomberg Senior ETF Analyst Eric Balchunas said on X that leveraged ETFs are for trading, not investing.
To keep leverage fixed at 3x, the funds must rebalance every day. That means buying more futures after gains and selling after losses, a mechanical process that can amplify intraday market moves. Over several days, returns can also diverge sharply from three times the underlying asset’s performance and may even move in the opposite direction.
Blockstream CEO Adam Back warned that auto re-leveraging strategies can bleed capital in a choppy, highly volatile market. Volatility Shares makes a similar point in its preliminary prospectus, saying the more volatile the benchmark, the greater the potential for volatility decay. Long-term performance can also be weighed down by the cost of rolling futures into later-dated contracts, which are often more expensive.
Overall, the SEC decision is seen as another sign that crypto is gaining products long available in traditional asset classes. Still, the article notes that while the new funds may appeal to short-term traders and speculators, spot ETFs remain the more suitable option for long-term and risk-averse investors.
