The SEC has approved the first US-based 3x leveraged ETFs on Bitcoin and Ethereum, issued by Volatility Shares. These products were structured as commodity trusts under the 1933 Act to bypass Rule 18f-4 of 2020, which caps loss risk at 200% for funds governed by the Investment Company Act of 1940. Due to their daily rebalancing mechanism, an asset that loses 10% one day and gains 11.1% the next leaves the fund 6.7% behind, and a single-session decline of 33.4% would wipe out nearly the entire net asset value. However, these ETFs carry the advantage of avoiding margin calls or forced liquidations, unlike offshore perpetual contracts offering 50x or 100x leverage. With Bitcoin’s annualized volatility hovering around 45%, a 3x leverage held for three months on a flat market erodes approximately 15% of capital before fees.
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