The U.S. Securities and Exchange Commission has approved a Cboe BZX rule change that would allow six exchange-traded funds from Volatility Shares, including products designed to deliver three times the daily return of bitcoin and ether futures. The agency approved the rule change on Oct. 2, marking a first for U.S. crypto-linked ETFs above 2x leverage.
The approval does not mean the funds can begin trading immediately. Volatility Shares still needs the SEC to declare its registration statement effective, and the order did not set a deadline for that step.
What the SEC approved
The proposed lineup covers bitcoin, ether, gold, silver, crude oil and natural gas. In the crypto segment, the products would seek 3x exposure through regulated futures contracts tied to bitcoin and ether rather than by holding the tokens themselves.
That distinction matters because U.S. crypto exchange-traded products had so far been limited to 2x leverage. If the Volatility Shares funds launch, they would become the first U.S. crypto ETFs offering leverage above that level.
Why the structure carries extra risk
Leveraged ETFs reset exposure every day to maintain their target multiple. In practice, that means a 3x fund must add futures after gains and cut exposure after losses, creating mechanical trading flows that often arrive near the market close and can intensify intraday price swings.
Because the leverage target applies only to daily performance, returns over longer periods can diverge sharply from three times the benchmark’s move. In volatile markets, that drift can become severe and may even produce results that run counter to what a trader might expect from a simple 3x bet.
Warnings from analysts and the issuer
Bloomberg Senior ETF Analyst Eric Balchunas described leveraged ETFs as products built for trading rather than investing, underscoring their short-term nature.
Volatility Shares makes similar points in its preliminary prospectus filed with its Form S-1. The firm said that the more volatile the benchmark, the greater the potential for volatility decay. The filing also states that an investment in the 3x Bitcoin ETF is not suitable for all investors, may be considered speculative, and should be undertaken only by those able to bear the risk of a total loss.
Futures costs and what comes next
The use of futures adds another potential drag. As contracts approach expiration, the fund must sell them and buy later-dated contracts, which often trade at higher prices. That rolling process can weigh on long-term performance, a familiar criticism of standard bitcoin futures ETFs since their U.S. debut in 2021.
For now, the next confirmed step is SEC effectiveness of the issuer’s registration statement. Only after that happens could the new funds begin trading, bringing crypto-linked leveraged ETF offerings in line with structures already available for several traditional asset markets.
Source: www.coindesk.com