SEC approves a 3x fix for bitcoin and ether traders who miss the wild swings
Traders who miss bitcoin's (BTC) early volatile years have something new to look at.
On Oct. 2, the agency approved a Cboe BZX rule change to allow six ETFs issued by Volatility Shares, each aiming to deliver three times the daily return of the underlying asset. Besides bitcoin and ether, the lineup covers gold, silver, crude oil and natural gas.
That's a major milestone because, until now, crypto funds in the U.S. had been capped at 2x leverage.
The funds can't trade yet, as the issuer still needs the SEC to declare its registration statement effective, and the order doesn't set a deadline. These products will hold regulated futures tied to bitcoin and ether and not actual tokens.
Market veterans have been quick to point out who these funds are built for.
"Leveraged ETFs are for trading, not investing," Bloomberg's Senior ETF Analyst Eric Balchunas said on X.
These funds must rebalance every day to keep leverage pinned at 3x. That forces them to buy more futures after gains and sell more after losses—mechanical flows that usually hit near the close and can amplify intraday moves. The bigger the fund grows, the bigger the impact. The same daily reset also means multi-day returns can drift far from 3x, sometimes in the opposite direction.
Blockstream CEO Adam Back put it more bluntly: "Auto re-leveraging strategies bleed capital in a sideways chop, especially with a high volatility underlying... like bitcoin," he said.
That bleed is known as volatility decay. Say bitcoin rises 10% one day and falls 10% the next. It ends down 1%. A 3x fund would gain 30%, then lose 30%, ending down 9%. The more price whipsaws back and forth in a range without a consistent directional trend, the more the leveraged product underperforms and bleeds capital.
Volatility Shares itself flags the risk. "The more volatile the benchmark, the greater the potential for volatility decay," the company said in its preliminary prospectus filed as part of a Form S-1 registration statement.
The filing is also blunt about who should trade these.
"An investment in 3x Bitcoin ETF is not suitable for all investors, may be deemed speculative, and should be considered only by persons who can bear the risk of total loss associated with an investment in 3x Bitcoin ETF," it said.
Lastly, futures add another cost. As contracts near expiry, the fund has to sell them and buy later-dated ones, which often cost more. That rolling creates a steady drag on long-term returns, a criticism standard bitcoin futures ETFs faced when they went live for the first time in 2021.
All in all, the approval is another sign of crypto getting the same products as traditional assets. For short-term traders and speculators, it's a powerful tool, but for long-term holders and risk-averse holders, spot ETFs remain the best bet. stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk's Crypto Week Ahead.
What’s trending
- Bitcoin is about to get a major bullish signal it hasn't had in over a year (CoinDesk): Bitcoin is down today, but its wider trend is telling a different story. The simple moving averages of its price over the past 50-, 100- and 200-days are one “crossover” away from a full bullish alignment it has not seen since 2025.
- Euro at 17-month low, dollar near pre-Liberation Day highs (Reuters): The euro sank to as low as $1.1161 in Asian hours, its weakest since May 2025, and was last down 0.62% at $1.1118. The US dollar index rose 0.39% to 102.33, after reaching 102.53, its highest level since April 10, 2025.
- Treasury yields inch lower as investors pare back Fed rate hike bets (CNBC): U.S. Treasury yields inched lower on Monday after a sharp selloff the week prior, as investors look ahead to the minutes from the Federal Reserve’s latest meeting.
- Ethereum investors are stuck in a two-week staking exit line. Here's why. (CoinDesk): Ether waiting to leave Ethereum’s staking system jumped more than fivefold in three days last week, pushing the exit queue to its longest wait of 2026. Most of the jump in withdrawals are from MetaMask, which disclosed a security incident on Sept. 30.
Today’s signal
The chart shows daily swings in Volmex’s annualized 30-day bitcoin implied volatility index, BVIV, also known as the bitcoin VIX.
The index measures the expected price swings in the cryptocurrency.
The index has been largely flat between 35% and 40% since mid-September, suggesting traders are pricing in orderly market conditions despite the rally in the Dollar Index and Treasury yields.
Steady volatility is typically a feature of uptrends. At the same time, a prolonged period of calm usually precedes big moves.