An asset management firm is making strides to expand its offerings in the rapidly evolving world of exchange-traded funds (ETFs) by filing a prospectus with the U.S. Securities and Exchange Commission (SEC) that proposes the introduction of 49 new funds. These funds are designed to provide investors with three times leveraged long and short exposure to various sectors including technology, cryptocurrencies, and gold.
Among the proposed offerings are ETFs focused on prominent firms such as Coinbase, MicroStrategy, the brokerage Robinhood, and cryptocurrency-related entities like BitMine Immersion and USDC issuer Circle. Additionally, the prospectus aims to incorporate Grayscale’s Bitcoin and Ethereum mini-trust ETFs as well as Volatility Shares’ ETF tracking Solana’s price.
Defiance Investments, the firm behind this initiative, has previously launched several two-times leveraged funds aimed at short-term investors looking to speculate on rapid price movements within the market. Current offerings include the Daily Target 2X Long MSTR ETF and Daily Target 2X Long HOOD, which replicate double the daily price changes of the underlying assets.
However, the introduction of three-times leveraged funds is a notable development, as such products are relatively rare and often come with significant risks. Many market observers express caution regarding the potential for these funds to yield adverse outcomes if the underlying asset deviates unexpectedly. The prospectus itself highlights that these new funds may not suit all investors, underscoring the inherent risks involved.
Bloomberg ETF Analyst James Seyffart commented on the situation, describing the market dynamics as “getting wild.” The proposal aligns with a broader trend among asset managers responding to growing demand for funds linked to digital currencies. Recently, LeverageShares and Themes Trust also filed proposals that include 3X long and short funds, specifically targeting COIN and HOOD, among a total of 14 ETFs.
As of late August, the SEC was actively considering more than 90 ETF applications tied to various cryptocurrencies and investment strategies. This influx of applications signifies a shift in market sentiment, especially following the popularity of spot Bitcoin and Ethereum ETFs, which collectively manage approximately $150 billion in assets, as reported by analytics platform CoinGlass.
Sumit Roy, a Senior ETF Analyst at ETF.com, remarked on the shifting landscape, noting that there had been concerns regarding market acceptance of 3X funds due to their inherently higher levels of risk. Despite earlier assumptions that only 2X leverage would be permitted, recent filings suggest that the SEC may be open to introducing more volatile products for investors seeking high-risk, high-reward trading opportunities. If approved, these funds would primarily cater to aggressive short-term traders.
