Defiance ETFs Seeks Approval for 2X Leveraged ETH Futures ETF
Defiance ETFs has submitted an application for a leveraged cryptocurrency ETF focused on Ethereum (ETH). In a filing with the U.S. Securities and Exchange Commission (SEC), the company proposed the Defiance 2X Ether Strategy ETF, which aims to double the daily performance of the rolling CME Ether Futures Index. This means that investors can expect amplified gains on days when Ether performs well, but also heightened losses during sell-offs.
The prospectus for the fund highlights that it differs from most other exchange-traded funds due to its daily leveraged investment results, making it riskier than alternative options that do not use leverage. Leveraged ETFs are known for their volatility and tend to underperform the assets they track over longer periods. Defiance emphasized that its fund could incur losses if Ether futures trade flat or experience only modest increases over a period longer than a day.
The company stated that the fund is designed for investors who actively monitor and manage their portfolios, and it is not suitable for those who do not intend to do so.
Defiance has also recently filed for its 2X Short MSTR ETF, which offers a leveraged short position on the Bitcoin development company MicroStrategy. This ETF has received criticism from industry figures, with Blockstream CEO Adam Back referring to it as a “terrible product” that could lead to significant losses for investors.
Following Defiance’s lead, ProShares has also filed for its own 2X and -2X spot Ether ETFs, indicating growing interest in leveraged cryptocurrency products.
This latest filing comes after the SEC approved Ether futures ETFs for public trading in October. The approval of the first 2X Bitcoin futures ETF earlier in the year prompted a surge in applications from asset managers seeking to launch similar products. These developments signaled a potential shift in the SEC’s approach to crypto ETFs.
While the first Ether ETFs have not generated significant trading volumes compared to their Bitcoin counterparts, their approval marked an important milestone and suggested that the SEC may be more receptive to crypto ETFs in the future. Three months later, Bitcoin spot ETFs were introduced and have since attracted $12.3 billion in net inflows.
Investors are now eagerly awaiting the approval of ETH spot ETFs, although industry experts believe that it may take some time before they are given the green light by the SEC.
