Cboe seeks SEC approval for the first U.S. 3x Bitcoin and Ether (Exchange trader fund) ETFs, giving traders amplified daily exposure to crypto.
Chicago Board Options Exchange (Cboe) is pushing crypto ETF leverage into a new space. The exchange has asked the SEC to approve Volatility Shares’ proposed 3x Bitcoin and Ether ETFs, giving U.S. investors a potential way to seek triple the daily moves of two of the largest cryptocurrencies through regulated exchange-traded products.
Cboe BZX Exchange submitted a proposed rule change to the U.S. Securities and Exchange Commission (SEC) covering Volatility Shares’ planned 3x Bitcoin ETF and 3x Ether ETF.
The SEC published the filing on 14 August, opening the proposal to the regulatory process. The proposal is important because Cboe’s current generic listing standards do not cover products with this level of leverage. That means the exchange needs specific SEC approval before the funds can be listed.
The same filing also covers 3x products linked to gold, silver, crude oil and natural gas, making the proposal broader than crypto alone.
If approved, the Bitcoin and Ether funds could become the first 3x leveraged Bitcoin and Ether ETFs listed in the U.S.
The proposed funds would not simply buy Bitcoin or Ether and hold them. Instead, they would mainly use CME Bitcoin and Ether futures contracts to seek three times the daily performance of the underlying asset. Cash and cash like investments would be used as collateral.
However, that daily target is important, as if Bitcoin rises 2% in a single trading day, a 3x Bitcoin ETF would aim for roughly a 6% gain before fees and other costs. But if Bitcoin falls 2%, the fund would target roughly a 6% loss.
The result can become more complex over several days because the ETF resets its leverage each day. This means its longer term return may differ significantly from simply multiplying Bitcoin’s total return by 3.
The proposal also fits with Cboe’s wider work in the crypto market. In March, the exchange launched the Cboe IBIT Volatility Index, which measures expected 30 day Bitcoin volatility using options linked to BlackRock’s iShares Bitcoin Trust.
The proposed ETFs would be sponsored by Volatility Shares LLC, which already has experience with leveraged crypto products.
Its existing U.S. lineup includes the 2x Bitcoin ETF (BITX) and 2x Ether ETF (ETHU). Both trade on Cboe BZX, with BITX launching in June 2023 and ETHU in June 2024.
The company's move into 3x products therefore builds on an existing market rather than starting from scratch.
The difference is the size of the bet. Moving from 2x to 3x gives traders a much stronger way to express short-term views on Bitcoin and Ether, but it also increases the potential losses.
Despite the attention around the filing, the ETFs are not approved and cannot begin trading yet. The SEC still needs to review Cboe's proposed rule change. The funds would also need their registration statements to become effective before they could launch.
Therefore, there is currently no confirmed launch date for either the 3x Bitcoin ETF or 3x Ether ETF.
That leaves the next major event with the SEC. If regulators approve the listing request and the required registration documents become effective, U.S. traders could soon have access to one of the most aggressive crypto ETF structures yet.
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