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Defiance ETFs submitted an application for another leveraged cryptocurrency ETF on Monday, this time focusing on Ethereum (ETH) instead of Bitcoin (BTC).
According to a filing made on Monday with the U.S. Securities and Exchange Commission (SEC), the Defiance 2X Ether Strategy ETF is an ETH Futures ETF designed to double the daily performance of the rolling CME Ether Futures Index. This implies amplified gains on days when Ether performs well, but significant losses during downturns.
Defiance ETFs Gaining Attention
“Since the Fund aims for daily leveraged investment outcomes, it is quite distinct from the majority of other exchange-traded funds,” states the fund’s prospectus. “It also carries more risk compared to alternatives that do not employ leverage.”
Defiance ETFs has just submitted a filing for a 2x leveraged #ethereum futures ETF. It may trade under the ticker $ETHL pic.twitter.com/9Z6M6tcQ3V
— James Seyffart (@JSeyff) April 8, 2024
Leveraged ETFs are considered risky not only due to their volatility but also because they typically underperform the assets they track over extended periods. Defiance pointed out that its fund will incur losses if Ether futures remain stagnant or even if they experience slight increases over a timeframe longer than one day.
“The Fund is not designed for, and is not suitable for, investors who do not plan to actively monitor and manage their portfolios,” the company stated.
Earlier this week, Defiance also filed for its 2X Short MSTR ETF – a leveraged short position on the Bitcoin development firm MicroStrategy, which investors consider a leveraged bet on Bitcoin (BTC). Blockstream CEO Adam Back criticized the ETF as a “terrible product” that could lead to significant losses for investors.
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On Tuesday, ProShares followed Defiance’s lead with applications for its own 2X and -2X spot Ether ETFs.
The Significance of Ether Futures ETFs
This filing follows the SEC’s approval of Ether futures ETFs for public trading in October. Approximately a dozen asset managers inundated the SEC with applications after the agency sanctioned the first 2X Bitcoin futures ETF from Volatility Shares in late June.
This fund – trading under the ticker BITX – has risen 91% year to date, in contrast to Bitcoin’s 55% increase.
The rationale was that if the SEC was willing to approve such a high-risk product, it might finally be receptive to Ether futures ETFs – the second largest cryptocurrency, which has historically exhibited a higher beta than BTC.
Although the initial Ether ETFs experienced lackluster volume compared to their Bitcoin counterparts, their approval indicated a potential shift in how the SEC might approach crypto ETFs in the future. Three months later, Bitcoin spot ETFs entered the market, attracting $12.3 billion in net inflows since their launch.
Investors are now anticipating the SEC’s approval of ETH spot ETFs, although experts are skeptical about a swift approval.
The post Defiance ETFs Files For 2X Leveraged ETH Futures ETF appeared first on Cryptonews.
