Cboe Files Groundbreaking Leveraged Bitcoin and Ether ETF Applications – SEC’s Decision to Shape the Future of Heavily T

The U.S. exchange Cboe has set the stage for a new era in crypto ETFs with a historic application filed with the SEC. The proposed 3x long ETFs on Bitcoin and Ether could offer institutional and retail investors unprecedented opportunities—along with significant risks. Yet the path to market readiness remains fraught with challenges.
When I first read about the application, I was left speechless. On Friday, the Chicago Board Options Exchange (Cboe) submitted a groundbreaking proposal to the U.S. Securities and Exchange Commission. At its core are two innovative Exchange-Traded Funds (ETFs): a 3x long Bitcoin ETF and a 3x long Ether ETF, both developed by Volatility Shares, a specialized provider of leveraged and inverse ETFs. With this move, Cboe is sending a clear message: the market for crypto-based leveraged products is maturing and being made accessible to a broader investor base.
A New Market Segment Emerges
Since the explosive launch of Bitcoin spot ETFs in January 2024, the crypto ETF market has grown rapidly. However, existing products have been limited to 1x long and short ETFs—without enhanced leverage. The new ETFs proposed by Cboe and Volatility Shares would break new ground: they would enable investors to capture three times the daily return of the underlying cryptocurrencies—or bet against them via short ETFs (which are also in development).
“This application represents a turning point,” says Dr. Thomas Mayer, Chief Economist at Flossbach von Storch Research Institute. “Leveraged ETFs on Bitcoin and Ether make crypto exposure far more attractive for investors but also riskier. The SEC now faces the challenge of balancing investor protection with innovation.”
How Do 3x ETFs Work?
Leveraged ETFs do not mirror the daily performance of their underlying asset on a 1:1 basis. Instead, they apply a fixed multiplier. In a 3x long ETF, for example, a 1% daily gain in Bitcoin translates to a 3% gain in the ETF. Conversely, a 1% drop erodes 3% of the fund’s value—an effect that can be devastating in volatile markets like cryptocurrencies.
While leveraged ETFs are not new—traditional markets such as equities and indices have offered similar products for years—they pose heightened risks in crypto. “The extreme volatility of Bitcoin and Ether can lead to rapid depreciation of the ETFs, even when the underlying asset shows only moderate fluctuations,” warns financial expert Markus Koch. Another issue is “volatility drag”: in sideways markets, leveraged ETFs can lose value over time even if the base asset remains fl



at.
I still recall debates from years ago about similar products in equities. Many experts at the time warned of dangers for inexperienced investors. With cryptocurrencies, which exhibit even more extreme volatility, the risks seem magnified.
Regulatory Hurdles: Why the SEC May Hesitate
The SEC has repeatedly expressed concerns about leveraged ETFs, particularly regarding the elevated risk they pose to retail investors. “The agency could argue that 3x ETFs are too complex and risky for the average investor,” says attorney Dr. Felix Höfer of law firm CMS. Additional concerns include market manipulation and liquidity risks, as these products can amplify price swings during illiquid periods.
Another critical issue is collateralization. Unlike spot ETFs, which hold Bitcoin directly, leveraged ETFs rely on derivatives like futures or swaps to achieve the desired leverage. This raises questions about transparency and control over the underlying assets.
Opportunities and Risks for Investors
For risk-tolerant investors, the new ETFs could offer an attractive way to capitalize on short-term market movements without owning or storing cryptocurrencies directly. Institutional players such as hedge funds and family offices could particularly benefit from the ease of trading via regulated exchanges.
Yet the dangers are substantial. “A 3x Bitcoin ETF can lose 50% or more of its value within days, even if Bitcoin only drops slightly,” notes crypto analyst Laura Walter. Moreover, leveraged ETFs are typically suited only for short-term strategies, as they are not designed for buy-and-hold investors.
What’s Next?
Cboe’s application must now undergo SEC review—a process that could span months or even years. If approved, the ETFs could launch as early as late 2024 or early 2025.
Meanwhile, Nasdaq is also developing its own leveraged crypto ETFs, adding competitive pressure that could push the SEC to approve innovation—provided regulatory concerns are addressed.
Conclusion: The introduction of 3x Bitcoin and Ether ETFs would represent a major step toward professionalizing the crypto market. But the SEC’s decision will reveal whether the regulator is willing to accept the risks—or prioritize investor protection over innovation. An exciting race for the future of the crypto ETF market has begun.
I’m eager to see how things unfold. On one hand, this could make crypto even more attractive to institutional investors. On the other, I wonder whether the SEC will take the bold step forward. What do you think? Would you invest in such products?